Letters: Systemic moral hazard

This refers to the Q&A with SBI General Insurance's MD & CEO Bhaskar J Sarma and Deputy CEO Steve Hollow "Our products sold through SBI are simple & scope of mis-selling is limited" (May 10). When I recently opened a savings account with SBI, I was coaxed into buying a personal accident (PA) cover for a nominal amount of Rs 100. I told the official that I was already covered, but she said it was "mandatory" for a person opening a savings account to buy this product offered by SBI General Insurance. Later, the branch manager clarified that "SBI tells its new customers that the PA cover is 'mandatory' so that they buy the cover (otherwise, they would not buy it) and consequently, insure themselves, thereby creating insurance awareness". Also, she candidly mentioned that the bank needed to achieve its targets. Insurance premium from over 100,000 new customers for SBI General Insurance is a lot of money, and this explains the huge volumes reported. It's high time the regulators looked into this systemic moral hazard that is plaguing the Indian financial services industry through such predatory practices.

Parikshit Menon Pune

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