If you have ever been an assiduous reader of detective fiction, as I was at some point, you would know that the detective looks for means, motive and opportunity.
In the last couple of weeks, there have been two interesting reports of fraud being perpetrated on mutual fund investors and insurance policyholders.
In both these cases, the media coverage has been about motive and opportunity, but it’s in the means that the most important lessons lies.
In the first case, someone obtained the customer database of ICICI-Prudential Life Insurance and ran a sales campaign consisting of calling up its customers, and convincing them to drop their current policies and switch to similar policies of other insurance companies.
In the second case, someone had been calling up the family members of policyholders who had passed away and giving them a sales pitch that they would benefit if they redeployed the money in other insurance policies and mutual funds.
A SEBI press release characterised these sales as ‘mis-selling’.
Two things stand out. First, the origin of both cases lie in financial firms failing in the task of keeping their customers’ data confidential. The second is the question of means. Consider the flow of funds.
Unlike an outright fraud or theft, in both cases the perpetrators’ alleged criminal act was to get more business for insurance companies or mutual funds and their payoff was the commission they received for these sales.
I think it’s self-evident that the flaw lies in the fact that the interests of these companies and the salesmen are not aligned to those of the customers.
When the helicopter scam was the talk of town, the defence minister had astutely observed that the ultimate cause of the scam was human greed.
Probably by sheer coincidence, that is true of these cases also. So things will improve either when the ‘system’ is changed, or when human greed is eliminated. Take your pick on which is likelier.