The Bank Counter Selling You ‘A Better FD’ Has a Sales Target Too

Yogita Kher, a homemaker in Jabalpur, went to her bank branch to renew a fixed deposit and left having agreed, in principle, to a ₹60,000-a-year insurance-linked savings plan for her husband, recommended by the same relationship manager who processed the FD. It was only weeks later, at a family wedding, that a cousin who works in insurance asked her one question that unravelled the whole recommendation: “Did they show you what the other insurers on their panel were offering?” Yogita did not know her bank had other insurers on any panel. Nobody had mentioned one existed.

This is bancassurance: banks selling insurance as corporate agents, earning commission on top of whatever else they sell you. It is a legitimate distribution channel in principle. In practice, it has produced one of the most persistent mis-selling complaint categories in Indian retail finance for over a decade.

What the complaint data actually shows

IRDAI’s own grievance data has repeatedly shown banks and brokers generating the largest share of insurance mis-selling complaints of any distribution channel — banks alone drew more than 12,000 mis-selling complaints in a single reported year (2018-19), with brokers close behind at nearly 11,000. The complaints follow a recognisable pattern: insurance bundled with a loan as an unstated precondition for approval, insurance sold to satisfy a bank locker requirement, and — perhaps the most common single complaint — insurance products described to customers as fixed deposits or short-term savings schemes rather than what they actually are: long-tenure insurance contracts with surrender penalties and a life-cover-driven charge structure. The concern was serious enough that IRDAI formed a dedicated task force in October 2023 specifically to review the bancassurance framework, and the RBI has separately signalled it will issue its own guidelines targeting mis-selling of financial products by its regulated entities.

Why this particular channel is especially effective at mis-selling

A bank carries decades of trust that an individual insurance agent doesn’t — you already trust them with your salary account, your loan, your savings. That trust transfers, often without scrutiny, to whatever else they recommend across the same counter. Bank relationship managers and branch staff are frequently incentivised on cross-sell targets that include insurance premium volume, which means the recommendation you get is shaped by an internal sales target you never see, delivered by someone wearing the same badge as the person who approved your loan.

The rule that was supposed to fix exactly this, and the gap it left open

What Yogita’s cousin was actually asking about is a specific regulatory framework: IRDAI’s Registration of Corporate Agents Regulations, 2015, which introduced what the regulator calls “open architecture” for corporate agents, including banks acting as bancassurance channels. Before this framework, a bank typically had an exclusive tie-up with a single insurer per line of business — one life insurer, one general insurer — and every recommendation, structurally, could only ever be that one insurer’s product. Open architecture changed the ceiling: a corporate agent can now tie up with multiple insurers, up to a maximum of nine insurers in each line of business — life, general, and health — rather than being locked into one. Every corporate agent is also required to file a Board-approved policy at the time of registration setting out exactly how it will implement open architecture, including its approach to single versus multiple tie-ups and its product mix.

Here is the gap Yogita fell into. The regulation raises the ceiling on how many insurers a bank may tie up with. It does not, by itself, force the branch counter to show you products from more than one of them unprompted. A bank can be fully compliant — genuinely registered with several insurers across life, general and health — and still have its relationship managers steer nearly every customer toward whichever single insurer on the panel currently pays the richest incentive that quarter, simply because nothing in the customer-facing conversation requires disclosing the panel’s full breadth unless asked. Open architecture is a structural permission, not a point-of-sale mandate. Yogita’s bank had other tied-up insurers the whole time. She just had to ask to find out.

The arithmetic across two products from the same branch’s own panel

When Yogita went back and asked specifically, in writing, for products from every insurer her bank was registered with for life cover, the branch produced a second option within the same visit: a straightforward term plan, from a different insurer on the same panel, for ₹12,000 a year, offering ₹50 lakh of pure life cover for her husband. Compare that against the ₹60,000-a-year product she had originally been shown, structured as a savings-linked insurance plan carrying roughly ₹10 lakh of life cover bundled with an investment component and a multi-year surrender penalty. For a fifth of the original annual outlay, the alternative on the very same panel offered five times the death benefit. Both products were legitimately available through her own bank branch, under the same open-architecture registration, on the same day. Only one had been offered to her without being asked.

The specific phrases that should make you stop and ask questions

“This is a better FD” (an insurance product is never a fixed deposit — it has surrender penalties an FD doesn’t); “you need this to get the loan approved” (insurance is not a mandatory precondition for most retail loans under IRDAI/RBI rules, though a bank may not say so unprompted); “just sign here, we’ll fill the rest” (never sign a proposal form with blank fields — the details filled in later may not reflect what you actually agreed to). If you hear any of these, ask for the product name and category in writing before signing anything.

What to actually do if you suspect you were mis-sold, and the one question that changes the conversation

Before you agree to anything at a bank counter, ask this exact question: “Which insurers are you registered with as a corporate agent for this line of business, and can I see one product from each before I decide?” A genuinely compliant branch can answer this immediately, because its open-architecture policy and panel of insurers are already on file with IRDAI — there is nothing confidential about which insurers it works with. If the answer is evasive, or the branch claims it “only works with one,” that claim is itself worth verifying, since most large bank corporate agents hold multi-insurer registrations even when a single relationship dominates the sales floor.

You also have a free-look period (typically 15-30 days from receiving the policy document) to cancel for a near-full refund — use it immediately if something feels off, don’t wait to “think about it” past that window. Beyond the free-look period, you can file a complaint with the insurer’s grievance cell, then escalate to IRDAI’s Integrated Grievance Management System (IGMS) or the Insurance Ombudsman if unresolved. Keep every piece of paperwork, including anything verbally promised in a WhatsApp message or email, since verbal assurances rarely hold up without a written trail.

The calculator settles the one question the bank counter has no incentive to ask on your behalf: independent of any single insurer’s product or premium, how much pure cover does your household actually need, and what should a plain term plan for that cover roughly cost anywhere on the market. Once you know that figure, any bundled or savings-linked pitch either clears the bar or it doesn’t, regardless of how many insurers happen to be on the branch’s panel.

What this does not mean

This does not mean every bank-sold insurance product is a bad recommendation, or that the relationship manager who approached Yogita broke any specific rule — her bank’s multi-insurer registration was genuinely compliant, and nothing in the open-architecture regulation was violated by presenting only one product first. It also does not mean savings-linked insurance is inherently wrong for everyone; some buyers genuinely want a combined savings-and-cover product and understand the trade-off going in. What it means is narrower: a bank being registered for open architecture tells you nothing about what you will actually be shown unless you ask, and the ceiling on how many insurers a bank may work with is a different number from how many it actually presents to any one customer at the counter.

Frequently asked questions

Is bank-sold insurance always a mis-sell?

No — bancassurance is a legitimate channel and plenty of policies sold this way are appropriate for the buyer. The concern is the pattern of bundling, target-driven pressure, and mischaracterization documented in complaint data, not that the channel itself is inherently fraudulent.

Can a bank legally refuse my loan if I don’t buy their insurance?

No — insurance cannot be made a mandatory condition for a retail loan under RBI/IRDAI guidance, though some optional cover (like a loan-linked term policy) can be genuinely useful and is sometimes conflated with a requirement in the sales conversation.

Does open architecture mean a bank must show me every insurer’s product?

No — the 2015 framework sets a ceiling on how many insurers a corporate agent may tie up with (up to nine per line of business) and requires a Board-approved policy on file, but it does not require the branch to proactively present products from every tied-up insurer to every customer. You generally have to ask for the comparison yourself.

How do I find out which insurers my bank is actually registered with?

Ask the branch directly for its corporate agency registration details and the list of insurers it is tied up with for the line of business you need — this information is a matter of regulatory record, not a trade secret, and a compliant branch should be able to produce it without difficulty.

Regulatory source: IRDAI‘s Registration of Corporate Agents Regulations, 2015 establishes the open-architecture framework and the multi-insurer tie-up ceiling described above; verify the current cap and any subsequent amendments directly on irdai.gov.in before relying on the specific figures. Complaint figures are drawn from IRDAI’s published annual grievance data for the year cited. The reconstruction of Yogita Kher’s situation and the panel-comparison arithmetic is this article’s own.

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Disclaimer: This article is for general information only and is not legal or financial advice. “Yogita Kher” is a composite character built for illustration and not a real individual. If you believe you were mis-sold a financial product, consult IRDAI’s grievance channels or a qualified advisor for your specific situation.