Dear Mr. Tan,
I am quite shocked to learn from your blog that up to 21 months of savings can be taken away to pay the agent to sell an investment-linked policy. If the monthly saving is $500, the total deduction is $10,500. Why should the agent earn so much money to sell a policy?
I am sure that the consumer is not aware about the total cost. Which consumer is willing to give away so much of the hard earned savings to pay commission to the agent?
I understand that the consumer is provided with a lot of information about the insurance product, including the charges. Many consumers are overwhelmed by the information, so they blindly trust the agent. When they find out the truth, it is too late.
Surely, the Government should set some reasonable limit to protect the consumer?
REPLY
I agree that there is a need for consumers to be better protected in Singapore. The commission rates for life insurance policies are too high.
In many countries, the regulators imposed certain limits on the commission rates, to protect the interest of the consumers. I hope that a similar practice can be adopted in Singapore.
imposing limit on agent commissions might not be a good idea. it only cures the symptom, not the problem. in insurance industry, market mechanism doesn't work and goverment should aim to fix that the same way they try to address anti-competitiveness in business.
ReplyDeletein my opinion it is better to make unbundling mandatory. insurers would still be able to sell ILPs by offering term insurance and unit trust as a pair. and have the customers the option to let the insurer to automatically deduct the term premium from funds in unit trust.
one large insurer here in indonesia is moving towards this model. though they still have to offer regular ILP because of market pressure.
You are right that government would not interfere with price fixing.
ReplyDeleteUltimately it is the consumers who have the power to determine and demand value for money. Consumers are powerful if they know their rights. The problem is consumers are scattered and "uneducated" and therefore don't know exactly what they are supposed to be given.All this time they have been short changed.
They must know what they are entitled to or should get before a product is proposed or sold to them. In this way unnecessary and not appropriate products will not be recommended.This will eliminate the unethical and incompetent insurance salesmen.
Good advisers will follow
in an order, steps to identify the products appropriate for their clients' needs. The salesmen push the products upfront. This is not the right approach. Customers must demand they go through an examination before the products are prescribed.If all customers understand this then we can see the day when the industry comes of age.