Banks are selling insurance policies to loan seekers

The banks especially who have an insurance arm of their own or that are marketing the products of an insurance provider are selling insurance products to the loan seekers.

The loan seekers who are applying for the loan are finding themselves in a tricky situation as they are being asked to take insurance policy and the reason they are giving that this will enhance the ‘chances’ of loan approval. The policy is on the life of the borrower against accident and other risks.

Amongst the customers some of them are finding insurance cover useful and some feel that they are being forced to take policy by banks which is against the norms set by Insurance Regulatory and Development Authority.

Mr P. Muneeswara Rao, a small-time employee in IDL told Business Line, “I was forced to go for a shield policy when I took a personal loan of Rs 1.3 lakh by a branch manager of a public sector bank, which cost me about Rs 12,000. I was told that the loan application would be approved only if I go for it.”

Mr Sesha Rao, a software professional with Google, agrees: “When I approached State Bank of India for a housing loan of Rs 25 lakh, I was told curtly to buy insurance as well, though I have a very reasonable cover for life.”

Mr Ravi, an IT professional working for Computer Associates, informed that the customers don’t have any choice either. He said, “Even though I have many insurance polices, I was made to go for another policy when I took a home loan from ICICI Bank.”

In fact in some of the banks loan application forms carry a column for insurance that even says explicitly that “efforts will be made to pursue the loanee to go for insurance”.

According to the sources selling of insurance policy is becoming a trend as the bank officials are being pressurized to sell banc assurance products in order to increase the fee-based income and the safe recovery of loan amount, among others.

According to a leading private bank official, “It is a fact that some pressure is put on the loan applicants for insurance. It sure is a drain on the purse for them but its adds to our performance if we could convince them to go for insurance cover.”