Chinese insurers are on a hiring binge, recruiting an army of agents to sell their products to a burgeoning middle class, but the risk of misselling by inexperienced agents on commission could prove costly to the industry and its customers.

In an immature market with less than half the penetration of the United States, and about a quarter of Japan’s, China’s insurers tapped the rising demand mainly by selling through banks, until regulators curtailed that channel last year over concerns that inexperienced customers assumed the products were as safe as bank deposits.

That triggered the recruitment drive as insurers needed direct access to customers to keep the $290 billion market growing. The largest, China Life Insurance Co , increased its salesforce by 28 percent to nearly a million in the six months to June, while next in line, Ping An , swelled its sales ranks by 25 percent to 800,000.

Industry specialists say the drive brings with it the danger of a part-time salesforce whose enthusiasm for commissions outstrips their financial expertise or training.

“Agents in China rely largely on personal networks to sell products; there’s not a high bar to hiring them, and some don’t get much training,” said insurance industry specialist Cliff Sheng, Greater China partner at consultant Oliver Wyman.

A spokeswoman for Ping An said the company has strict procedures for recruiting agents including a three-tier interview system, and a comprehensive training system to help agents acquire industry knowledge and professional ethics.

China Life declined to comment.

High Turnover

Sheng likens the business to what he called the ‘housewife’ sales model seen in Korea and Japan in the last two decades, where a predominantly part-time army of independent agents sold policies.

Both markets have been plagued by misselling and low customer retention, with Korea’s Financial Services Commission in 2014 setting new rules for suspending and fining sales agents for misselling products.

Beijinger Coco Lu, who sells for a few hours a week while her daughter is in school, is typical of the new breed of recruits, most of whom sell part-time.

She started selling in February, first to friends and family, then fellow parents at school events and even shop staff she befriends.

She said she received a high commission of 20-30 percent of the premium for some insurance in the first year.

Lu has no finance background but said Ping An’s training was renowned for its rigor.

“The training at Ping An is really good. In the industry, Ping An is called the Huangpu Military Academy.”

While Lu’s fledgling career has got off to a bright start, sector specialists said there could be problems for her cohort when they exhaust their personal networks. Many drop out, to be replaced by more novices.

“Mass recruitment attempts are reaping high agency turnover and reduced agency quality,” consultants Towers Watson wrote in a February report on China’s insurance industry.

Towers Watson cited an industry retention rate for first-year recruits of only 30 percent, and Ping An training manager Zhang Jian said theirs was just 15-20 percent.

Complaints Rising

To keep the commissions coming, some agents can be tempted to sell unsuitable products to the customer.

“If commission based, misselling tends to occur more frequently,” said Tony Tan, head of standards and advocacy in Asia Pacific for investment professionals body CFA Institute.

China’s insurance regulator said total complaints rose 4 percent in the first half of 2015.

Misselling scandals have cost insurers billions of dollars in fines in the West, but in China the damage is more likely to be in lost business and reputation.

Customers regularly make very public demonstrations against businesses they think have let them down.

Reuters met a woman who gave her surname as Wang protesting in a group of about 50 people outside a Ping An branch in Beijing.

She said two of the company’s salespeople she had befriended at a social event went on to sell her third-party wealth management products they wrongly said carried guaranteed returns and protected capital. Wang said she lost 900,000 yuan ($140,000).

“I feel like I’ve been cheated,” she said. “No one told me of any risk; at the time they told me there was no risk.”

A spokeswoman for Ping An Life Insurance said the company has strict rules prohibiting agents from selling third-party products, and it was cooperating with China’s Public Security department in investigating what had happened in this situation.

“We are trying our best to help investors safeguard their rights and repair their loss as soon as possible,” she said. ($1 = 6.3878 Chinese yuan renminbi)

(Reporting by Lawrence White and Engen Tham; Additional reporting by Beijing newsroom; Editing by Will Waterman)