Citizens' Issues
Public Interest Exclusive
Flat owners urge Maharashtra government to retain MOFA

Ramesh S Prabhu, chairman of the Maharashtra Societies Welfare Association said, “MOFA has been in force for almost 60 years. It is more consumer-friendly. The new Bill has many shortcomings”

The Maharashtra government’s new Maharashtra Housing (Regulation & Development) Bill, 2011, is facing strong criticism from activists and flat owners. Activists and citizens are demanding that the government shelve the new Bill and strengthen Maharashtra Ownership of Flats Act (MOFA) instead, and a public hearing be organised on the issue.

Members of Maharashtra Societies Welfare Association have protested against the hushed manner in which the government has pushed the legislation and want a public discussion to be held. Ramesh S Prabhu, chairman of the association, said, “We have written repeatedly to the chief minister and the minister of housing, but no public hearing was held on the matter. How can they pass a legislation which is going to affect the people adversely without consulting the flat owners?”

The association is planning to send a delegation to the government to retain the MOFA and scrap the new Bill. In collaboration of several NGOs, the Maharashtra Societies Welfare Association organised a public meeting-cum-awareness workshop on the proposed Bill on Thursday. Mr Prabhu, chairman, Maharashtra Societies Welfare Association, said, “There is an urgent need to strengthen the MOFA further. There are many high court and Supreme Court judgments interpreting several provisions of the MOFA. This Act is well settled.”

Mr Prabhu said that it will be more helpful for the consumers if the provisions related to regulatory authority or Appellate Tribunal is incorporated in the MOFA itself, instead of the Act being replaced by a new legislation which is evidently pro-builder. He said, “MOFA has been in force for almost 60 years. It is more consumer-friendly. The new Bill has many shortcomings. We have received many proposals as to how to make the housing sector more transparent.”

He pointed out some of the grey areas in the new Bill. “Builders may just register multiple projects under separate aliases online after registration. The documents that are required for registration have to be self-attested by the builder; and registration will be done before getting them validated by any other authority,” Mr Prabhu said.

He also pointed out that in case of default, the developer will be subject to a light monetary penalty. “At the most, if the delivery is delayed, the builder will refund the money to the customer. If I am spending Rs60lakh-Rs70laks to buy a flat, I would want the flat and not the money,” he added.

Veteran property lawyer Vinod Sampat said, “The government can now rechristen the “minister of housing” as “minister for builders”. With the Maharashtra Housing (Regulation and Development) Bill, the government is going out of its way to be friendly with the builders.”

Mr Sampat also said that the housing minister’s claim that the earlier law doesn’t have any option of taking criminal action against builder is false. “I myself have fought many cases. If he says earlier there was no option of penalty, it is a false statement,” said Mr Sampat.


Personal Finance Exclusive
How you can get ripped off by the staff of insurance company themselves!

Many implicitly trust insurance companies. We present you the chilling story of what can...

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Life Exclusive
Max New York Life ad shows off its ethics but will it turn into a self-parody?

Max New York Life Insurance has come up with ad campaign titled ‘Aapke Sachche Advisor’ to change consumers’ perception of an industry badly tarnished by rampant mis-selling. The ad only proves admission of guilt and desperate efforts to overcome years of misdeeds

Max New York Life Insurance has just released a television commercial (TVC). For the first time, an insurance company is not talking about how your family can be safe and secure; how your child’s dream of becoming a pilot, or how you can retire with your head held high. The TVC is about mis-selling.

The advertisement features an agent, or the ‘sachche advisor’, trying to sell a Max New York Life product to a potential customer. In the process of selling, we encounter another character, supposedly the devil, who, in the background, is forcing the ‘sachche advisor’ to mis-sell the product by giving bad advice. However, the agent disregards the devil, and instead sticks to his ethics. The customer, ever-trusting, asks where is he supposed to sign. In trying to portray that Max New York Life is a great customer-oriented company employing ethical agents, what the ad really does is to openly admit the menace of mis-selling.

It is nice to see that an insurance company has taken the high moral ground but what can it live up to it?

Today, a reader in complained that while he took a home loan of Rs45 lakh from Axis Bank, when the first disbursement was made “he came to know that the total sanctioned amount was Rs49.25 lakh. The balance Rs4.25 lakh was the insurance policy that the bank has paid. “This was never told to me clearly and I cannot bear such a loss,” complains the reader. The purpose of bank was to earn unlawful commission from the insurance agency at our cost. Also, the cost of insurance is much higher than the prevailing market rates. I and my family feel cheated by this unscrupulous activity and seek you help to save our hard earned money. As nobody in the bank replies properly and only assures that the insurance will be returned if loan is prepaid, this is only a way of fooling customers. The bank has not only disbursed Rs4.25 lakh wrongly but also charging interest on the same.” The insurance company? Max York Life! We are not surprised. Mis-selling is generic the way insurance companies work. It is embedded in the structure of prices and commissions.

In our recent cover story dated 19 April 2012 (This can happen to you!) we had highlighted gross cases of hard-selling and mis-selling, where customers were sold toxic policies like Highest NAV Plan and Classic ULIP, causing anguish and financial losses. There was even an advisor contest by Reliance Life Insurance to give incentives to its agents to jam down these very unsafe products down customers’ throats so that agents could win big prizes such as a Honda City car. Earlier this year (Reliance SIP Insure investor caught in a trap), an investor had fallen for Reliance’s Tax Saver Fund, a mutual fund-insurance combo plan, where merely switching bank accounts would kill all the benefits accrued. The environment has become toxic and conducive to mis-selling, but the regulators are apathetic.

If mis-selling was not common and Max New York Life was not deeply concerned about it coming in the way of increasing sales, there would not have been any reason to do an ad around it. Since the majority of insurance policies are wrong products sold to wrong people, this rare confession of Max New York Life is welcome. But there are several things wrong with this TVC.

1. The key factor in large scale mis-selling insurance is steep sales targets and juicy commissions. While the Max New York Life highlights how a simpleton agent is able to remain ethical, it does not say whether he is doing is doing this out of the goodness of his heart or what is impelling him to do it. After all, there is no mention that Max New York Life has reduced commissions and also steep sales targets which are the prime reasons for mis-selling.

 2. The maximum selling and (therefore mis-selling) is not done by innocent-looking agents but devils in pinstripes—the relationship managers of banks who are highly paid and are incentivised to sell in order to meet sales targets. They are constantly under pressure to meet those targets, regardless of the customers they meet, and thus resort to mis-selling. Despite this, the regulators do not particularly care about coming down on hard-selling by big banks. Indeed, the Indian Banks’ Association has actually stated that it cannot and will not prevent mis-selling by banks.

A press release of Max New York Life on this ad quotes Anisha Motwani, director and chief marketing officer as saying, "The life insurance industry is maligned by a perception of large-scale mis-selling, primarily on account of the agents who take advantage of the consumer's lack of financial understanding and ignoring the actual need of the customer. This however is not true for all agents and hence it would not be appropriate to tar the image of an entire industry based on such perceptions.” Thus, according to her, there are ‘good’ agents and ‘bad’ agents. How will the customer identify which ones are ‘good’ and ‘bad’?

The answer, according to Ms Motwani, is by merely gauging the behaviour of insurance agents rather than products.  She further adds, “This campaign has been designed to extend itself beyond promoting life insurance policies and products and begin establishing trust with the consumers by educating them on how to identify a customer-centric company and evaluate the correct selling behaviour of the agent keeping in mind the needs of the consumer."

The campaign is essentially pleading television viewers to ‘trust’ agents and that Max New York Life is saintly. The underlying message also tells the public that mis-selling will not happen from them in future. However, in a commission-based model, mis-selling is bound to happen, and when it does happen, it will open the doors for investors and policy holders to sue Max New York Life on the grounds of the being misled by the TVC? That mess of course would be handled by the legal department and not the marketing hotshots in the company or the agency Ogilvy & Mather who have thought up this gimmick.

The implicit admission of the industry’s misdeeds, while brave, is false because it does not address the core problem of unethical selling in pursuits of stiff sales targets and fat commissions.




5 years ago

Dear Mr Govindaraj,
Your article was pleasant to read though a bit too decided.
While you do mention how the commercial is a welcome change, you also slight the company by literally deciding that they won't be living up to it. Agents might have steep targets but that my friend, is no excuse for them to fleece the consumer (I am one too). And as of today the industry does suffer from a trust issue from all its customers. I am sure these commercials have been thought out extensively before execution because for a change it required a client who could actually live up to its word. It's a risk most will say, but it's heartening to see that Max has not just taken a risk but delivered on it too.

I will look forward to read a lot more of your articles but do all of us a favour, keep it a little bit open.

Thanks and cheers.

Nagesh Kini FCA

5 years ago

How right is the Devil behind the 'sacha dost' !
I've yet to get an agent who knows his job.
In renewing my Mediclaim with New India I insisted on seeing the face of the Agent and Development Officers whose names appear in the policy and get paid even when I went to pay the renewal period. I had to put in writing that I didn't want any invisible agent and also no TPA. Because they are not helpful even in cases of genuine claims settlements.
To add insult to injury they continue to get paid at my cost and I end up by paying hiked up premium.
Gross mis-selling and cheating too is the name of the game.

Harsh Shah

5 years ago

Is IRDA listening ? who is promoting Bank Insurance. What action is taken by IRDA with the Private Insurers to safeguard the person that the policy is not mis sold by Bank Employees. At Bank counter you see different face every time you go. Do all these different faces IRDA insurance licence is a question to be asked.

a v moorthi besides TIHAR

5 years ago

In the case of referred housing loan it could be that the Axis Bank might have covered the borrower with a policy similar to loan liability insurance available with Public Sector Banks like Andhra Bank . if this is so it is good one because housing loans are repayableover a period of 15-20 years and in case of sudden death of the borrower during the tenure of loan at the family retains the house as liabilty is taken care in full by this loan liability insurance and Bank is also full repayment of the loan, so in a way loan liability insurance is a win win for the borrower as well as the lending institution.



In Reply to a v moorthi besides TIHAR 5 years ago

In face Max New York is the insurance product offered by Axis - may be this is their bancassurance thing or whatever they call it.

Just walk into any Axis bank branch and say that you want to buy insurnace - they will propose only Max New York Life.


In Reply to a v moorthi besides TIHAR 5 years ago

Not correct sir. Repaying Rs 5 lakh more is no joke. And most people pre-pay loans. So why have a policy covering the tenture. Why a one time single shot payment? Why do it sneakily without telling the customer? And what are these shady deals between banks and insurers? This is exactly how Suchitra Krishnamoorthi was ripped off too by HSBC which had a deal with TATA AIG and left her high and dry afterwards.

What is the RBI doing??

Deepak R Khemani

5 years ago

A recent report in the newspapers "During first three quarters of 2011-12 more than 3 lakh active agents have left the profession or faced a cancellation of licenses. As of 31 December 2011 number of agents came down to 23.78 lakh from 27.10 lakh last year".
Guess which company has a very high Number of its agents leaving in the last few years?

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