Islamabad, President Dr. Arif Alvi has mandated the Federal Insurance Ombudsman (FIO) to require insurance companies to disclose any conflicts of interest to consumers before finalizing insurance policy sales. This directive comes in the wake of several instances of policy mis-selling, which the President notes require a comprehensive review of the product structures and the commission system for agents.
According to Press Information Department, President Alvi’s decision was pronounced while addressing a dispute between Pak-Qatar Family Takaful Ltd and a policyholder, Anwar ul Haq, where the latter had faced difficulties in retrieving his premium payments from the insurance company. The complaint had led to an FIO ruling in favor of Mr. Haq, which was subsequently contested by Pak-Qatar Family Takaful Ltd.
During a personal hearing, President Alvi acknowledged that the insurance company had received Rs 4.5 million in premiums from Mr. Haq and had profited from these funds. Emphasizing the principles of equitable enrichment and equity, he asserted that it would be unjust for the company to retain the profits made from Mr. Haq’s investments without due compensation. Criticizing the opaque nature of current insurance products and the significant commissions that agents receive, the President noted that this often leads to the mis-selling of policies and unjust enrichment at the expense of the insured.
President Alvi underscored the recurrent issues in the insurance industry, pointing out the lack of transparency and the potential for misleading or fraudulent sales tactics. Stressing the importance of honesty in trade, as exemplified by the Prophet Muhammad (PBUH), he deemed it essential for customers to be fully informed about the commission agents earn from their premium payments.
In conclusion, President Alvi rejected the insurance company’s appeal and amended the FIO’s order, directing Pak-Qatar Family Takaful Ltd to refund the full amount of Rs. 4.5 million to Mr. Haq within 30 days. This decision marks a significant move towards ensuring greater transparency and fairness in the insurance sector.