Walking into a bank to place money in a fixed deposit or ask about savings and investment options may seem straightforward. But when an insurance product is offered through the bank, it is important to understand exactly what you are buying.

Bancassurance refers to the distribution of insurance products through a bank. These products can range from traditional life insurance and savings plans to investment-linked policies (ILPs). 

Although they are sold through the bank, they are insurance products underwritten by an insurance company and are not banking products, such as fixed deposits or savings accounts. Understanding this difference is important when deciding whether the product meets your needs.

Disputes handled by the Financial Markets Ombudsman Service (FMOS) show why it is important to understand what you are buying, what you are agreeing to, and what you are signing, including the product’s payment obligations and key terms. 

Having a clear understanding from the outset can make a significant difference if a disagreement arises later.

Traditional Policies vs Investment-linked Policies

Traditional life insurance policies and investment-linked policies can both provide insurance protection, but their structures and risks differ.

Traditional life insurance policies generally provide benefits according to the terms of the policy. Depending on the type of product, certain benefits may be guaranteed, while others, such as bonuses or dividends, are non-guaranteed and may vary based on the product's performance and terms. 

When considering such a policy, consumers should look beyond the headline benefit and understand the premium payment period, coverage, exclusions and what they would receive if they surrendered the policy early.

An investment-linked policy combines insurance protection with investment features. Part of the premium is allocated to investment-linked funds, while policy charges and insurance costs are deducted in accordance with the policy terms. 

The value of the investment component may increase or decrease depending on the performance of the selected funds. As insurance charges may change over time, the long-term sustainability of the policy depends on the value of the units and the funding arrangements under the policy.

This means an ILP should not be automatically treated as a fixed-return savings product or as a substitute for a fixed deposit.

The suitability of a policy depends on whether its features, risks, costs, and payment obligations align with the consumer's needs and are consistent with the representations made and the consumer's understanding at the point of sale.

When can a bancassurance dispute arise?

A bancassurance dispute may arise when a consumer subsequently discovers that the product purchased, the associated payment obligations, or the benefits provided differ significantly from the representations made during the sales process or from the consumer's understanding and expectations at the time of purchase.

For example, a consumer may believe that:

  • The product was a fixed deposit or savings product rather than an insurance policy.

  • The insurance coverage was provided at no additional cost as part of the fixed deposit package.

  • The premium was a one-time payment, when it was, in fact, payable annually or over a specified number of years. 

  • Funds could be withdrawn at any time without incurring significant financial loss or penalties.

  • The full amount paid would be refunded upon cancellation of the policy.

Such allegations cannot be assessed solely on the basis of the consumer’s expectations or the fact that the product ultimately resulted in an unfavourable outcome.

A fair assessment requires consideration of the available evidence, including what was represented and explained during the sales process, the information and documents provided to the consumer, and the terms and conditions to which the consumer agreed.

Two cases, two distinct outcomes

FMOS case experience shows that the key issue is not simply what a consumer believed, but whether the available evidence supports what was represented during the sales process.

Case Study 1: When the records did not support a mis-selling allegation

Yap visited XYZ Bank intending to place funds in a fixed deposit. A sales manager introduced an investment-linked insurance plan providing investment features and life insurance protection. Yap proceeded with the plan, which required an annual premium of RM100,000.

Approximately 11 months later, Yap realised that the RM100,000 payment constituted an annual premium rather than a one-time payment. He requested a full refund from the bank, asserting that his intention had been to place the funds in a fixed deposit and that he had no interest in purchasing an investment-linked product. 

However, the available evidence told a different story.

ABC Insurance conducted a welcome call with Yap in Mandarin, the language he communicated exclusively in. During the call, the representative explained the product features, premium amount, policy term and the applicable 15-day cooling-off period. The documents signed by Yap also set out the relevant terms.

The evidence did not establish a misunderstanding or miscommunication during the sales process, and Yap did not provide sufficient evidence to substantiate his allegation that the product had been misrepresented.

The recommendation was therefore made in favour of the bank.

Consumer takeaway: Simply stating that the intention was to purchase a fixed deposit does not, by itself, prove mis-selling. What is important is the evidence showing what information was provided, how the product was explained, and what the consumer understood and agreed to when the transaction took place.

Case Study 2: Ravi Thought He Was Placing His Money in a Fixed Deposit

Ravi visited the bank with his wife in December 2024 to withdraw his RM30,000 fixed deposit due to the low interest rate. 

The sales staff introduced a plan requiring RM30,000 to be paid annually for three years. Ravi said he was told this would provide a higher return and that the money could be withdrawn within a year.

Ravi signed the documents presented to him, believing the transaction was for a fixed deposit. Over the following months, he repeatedly asked the bank for his fixed deposit receipt but was told to wait for further communication.

It was only several months after receiving the policy documents that Ravi and his wife realised that the RM30,000 had been used to purchase an insurance policy from ZLife. Ravi complained that the policy had been mis-sold, but his request for a full refund was rejected.

The Bank relied on the documents signed by Ravi, the sales illustration and the SMS, email and follow-up attempts made after the policy was issued. However, the bank acknowledged that the payment receipt was not provided despite Ravi’s repeated requests. The receipt clearly identified the payment as an insurance premium.

Ravi’s repeated requests for a fixed deposit receipt indicated that he had not fully understood the nature of the product he had purchased. On the balance of probabilities, FMOS concluded that the policy had not been adequately explained during the sales process and that elements of mis-selling were present.

The FMOS found in favour of Ravi and recommended that he be reimbursed accordingly. Taking into account the RM900 already paid by ZLife, the bank was recommended to refund the balance sum of RM29,100.

Consumer takeaway: Before signing any financial product documents, ensure that you fully understand the nature of the product, your payment obligations, and the party to whom your funds will be paid. Always request and retain the relevant documentation and payment receipts, and promptly raise any concerns or uncertainties.

Five questions to ask before signing up

Consumers can reduce the risk of misunderstanding by asking a few simple questions before committing their money.

1. Is this a bank deposit or an insurance product?
The fact that a product is offered or sold through a bank does not necessarily mean that it is a bank deposit. Banks may also distribute insurance and investment products, each with different features, risks, returns, and terms. Consumers should therefore ensure they understand the nature of the product before making any commitment.

2. Is the premium a one-time payment or a recurring commitment?
A premium may be payable as a single payment or as a recurring commitment over several years. Always ask how much you are required to pay, how often payments are due, and for how long. Make sure these details are clearly documented before signing any forms.

3. What happens if I surrender my policy early or withdraw my funds before maturity?
Before purchasing a policy, ask for the applicable surrender value or surrender value schedule so you understand the financial implications of terminating the policy early.

Do not assume that cancelling a policy will entitle you to a full refund of all premiums paid. Depending on the type of product and the timing of the surrender, the amount payable may be significantly lower than the total premiums contributed.

For investment-linked policies (ILPs), consumers should also understand how policy charges, fund performance, and withdrawals may affect the policy's value, sustainability, and insurance coverage over time.

4. What exactly is guaranteed, and what is not?
Understand the difference between “guaranteed” and “projected” benefits. Ask the representative to explain which benefits are guaranteed and which depend on investment performance or other conditions.

5. What is my cooling-off or free-look period?
Understand your cooling-off or free-look rights, including the applicable timeline and process. Use this period to review the policy carefully and promptly raise any concerns if the product does not correspond with what was represented or explained during the sales process.

Keep your own records

In the event of a dispute, the outcome often depends on the evidence of what was disclosed, explained, and agreed to during the sales process.

Consumers should retain copies of all documents provided, including the Product Disclosure Sheet, sales illustration, application forms, policy documents, and any related correspondence. Relevant text messages, emails, and other communications should also be preserved, as they may help establish what transpired at the point of sale.

Verification or welcome calls should not be regarded as a mere formality. These calls provide an important opportunity for consumers to seek clarification, confirm their understanding of the product, and verify key information such as the product features, premium commitments, benefits, risks, and other obligations before proceeding.

Know what you are buying before you sign

Bancassurance offers consumers access to insurance and investment products through a familiar banking environment. Nevertheless, consumers should ensure they understand the product they are purchasing rather than relying solely on their relationship with the bank. 

Taking the time to obtain clear information and retain relevant records can help avoid misunderstandings and facilitate the resolution of any future disputes.

How to Seek Redress Through FMOS

If you believe you have suffered a financial loss due to mis-selling or misrepresentation of a bancassurance product, you do not have to navigate the dispute alone or resort to court proceedings.

FMOS accepts eligible disputes involving direct financial losses of up to RM250,000, subject to its jurisdiction and eligibility requirements.

Before approaching FMOS, you must first lodge a formal complaint with the relevant financial service provider. If you are dissatisfied with the final decision, you may refer the matter to FMOS within 6 months of receiving it. If there is no response within 60 days from the date of your complaint, you may also refer the matter to FMOS.

FMOS offers a free and impartial avenue for consumers and investors to seek redress in the financial and capital markets.

Resolving Disputes, Maintaining Trust

File Your Dispute: complaint.fmos.org.my
Official Website: www.fmos.org.my
General Line: +603-2272 2811
Address: Level 14, Main Block, Menara Takaful Malaysia, No. 4, Jalan Sultan Sulaiman, 50000 Kuala Lumpur
Operating hours: 8:30 am – 5:30 pm, Monday–Friday

This content is provided by Financial Markets Ombudsman Service (FMOS)

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

Interested in having your press releases, exclusive interviews, or branded content articles on Malaysiakini? For more information, contact advertise@malaysiakini.com or advertise@fgmedia.my