When I give financial planning talks to the general public, I get approached by many people who ask my advise on the insurance policies that they have bought.
Here are the common faults of insurance agents:
1. Over-selling. Selling more life insurance than is needed, e.g. too much critical illness coverage.
2. Unsuitable products. The agent sell products that earn a high commission, but do not serve the important needs of the customer.
3. Fail to explain the product. Many customers are not clear about the product that they have bought.
4. Unrealistic projections. For example, stop paying premiums on reaching the critical year.
Clearly, the high commission that is paid to the agent is responsible for these unethical practices.
The blame is not entirely on the agent. The insurance company that design the products and "motivate" the agents to sell aggressively and meet high sales target are also responsible.
Some agents act professionally and look after the interest of their clients. I hope that all agents can fall in this category - but this may be just wishful thinking.
Dear Mr Tan, in your opinion, is there a need for MAS to license insurance agents? For those IFAs operating in a licensed financial firm, why do they need a license individually to practice?
ReplyDeleteI feel that MAS is trying to distinguish these 2 groups of advisers but doing it slowly over time. I do hope the licensing requirements (including renewals) do help to weed out unethical advisers.
Also, i feel that there is a conflict of interest in the insurance companies trying to enforce compliance issues on their representatives and watching their bottomline.
I share your vision where advisers operate in a fee-based model and salaried advisers. Free of commissions and conflict of interests.
In good time like now, mis-selling
ReplyDeleteand unethical selling are blatantly rampant especially the insurance companies are giving out gifts incentives to motivate more sales. The selling process is shortened so that more sales can be made . This results in compromising the needs of customers.
It is like pasar malan every where, every corner stalls are put to peddle and tout their products very often to annoyance of the public. How can the needs of customers be met in this way? in such a short while? Financial planning is a serious process. How can this be done in a quikie?
I just pity those unwary customers who buy in this manner.
Dear Mr Tan,
ReplyDeleteI share your sentiments about the insurance industry.
I am a consumer and I have learnt a few lessons.
As consumers, we just have to educate ourselves and learn to buy the proper insurance products.
I think some kind of legal precedents will help to tidy up the industry.
ReplyDeleteA body to advise on legal suits against roque insurance agents like CASE at affordable fee should be set up.
Once policyholders get litigious and know their rights and where to turn to for advise, this will then make insurance agents not to play play.Their recommendations must be able to withstand close scrutiny by third party review.
However customers must be educated on financial awareness. It is not about insurance only but about many areas of their personal finances.They have to know that all their needs are always competing for attention and the right and qualified adviser can help them to sort it out and not an insurance salesman. Insurance agents are trained to sell, push and peddle products. They don't know about financial planning.Most are looking for get rich quick scheme and insurance selling offers them this opportunity. So unless the industry is cleaned up of these unscrupulous and unethical and cheats insurance salesmen we will continue to risk engaging one. A unified effort is needed.
To start with ,only engage advisers with accredited tertiary qualifications like CFP,CFA, CPA, MFP or Master of science in wealth management.