Tan Kin Lian's Blog: Distress over an investment linked policy

Sunday, September 14, 2008

Distress over an investment linked policy

A reader asked for my advice on the following:

> He invested heavily in an investment-linked policy. He made many fund switches in past years.

> Recently, he asked to make a partial surrender. The company held back the payment of the surrender amount, to investigate his fund switches. The payment was not made after more than one month.

> The company did not specify in writing the reason for the delay and the nature of the investigation. The customer called the company, but was given verbal promises that were not kept.

>The customer also asked to switch from the equity fund to the money market fund. This was not executed. The customer went to the company the following day and submitted a new request. This company did not execute the switch. The company wrote a week later to state that the switching has been suspended due to irregularites. They did not specify the nature of the irregularities. The equity fund dropped by 30% over the next two weeks, causing great loss to the customer.

I advised the customer to lodge a complaint with MAS on the dreadful conduct of the insurance company. If this is not resolved, the customer should take up a legal case against the company for the losses that they have caused to him.

7 comments:

ym said...: meanwhile, a few 100 miles away.. financial meltdown is in the making on wallstreet..

http://online.wsj.com/article/SB122134089502132567.html

the austrians/miseans are finally vindicated!!!

ym; September 14, 2008 4:07 PM
zhummmeng said...: This is definitely a case of a negligent act on the part of insurer and the insurance agent.
They should be liable for this negligence severally or jointly.
The policyholder should complain to MAS for professional misconduct and to FIDREC for compensation from the insurer.; September 14, 2008 4:39 PM
David said...: Maybe MAS will only act on cases that clearly break the law. If it does not break the law, even though not morally right or ethical, nothing can be done, right? Ever heard of being charged in court or penalised for unethical (in itself a grey area) behaviour for financial product/service cases?
As to taking legal action against the company, to ordinary folks, this is what is called easier said than done.; September 14, 2008 5:47 PM
zhummmeng said...: Reported in the Sunday Paper today on page 4 is another case of unethical practice by bank sales consultant.
Here you have a 62 year old woman who had $50k saved since she was 24 years old, to put in a FD account but instead 'persuaded'(misled) to invest in a unit trust fund and told of the prospect of higher return. 6 years on she found that her $50k has become $30K, it has suffered a loss of $20K.
What has the bank got to say or the consultant to say?
Absolutely NOTHING...The woman should be refunded the full capital of $50K with full interest compounded for the last 6 years as if it was deposited in FD with the bank.
Someone may ask what if the woman's investment made a lot of money, should she inform the bank that she made a mistake to invest in the unit trust?
The answer is No.Too bad the bank is always WRONG when it comes to financial matter like investment unless the bank can prove there was 'reasonable basis' but in this there is no 'reasonable basis to talk about.The old lady's circumstances were inappropriate and it is clear there was no exhaustive gathering of data.If there was the inappropriateness would have been uncovered.
No investigation is needed. The old lady must be compensated and the consultant be punished for unethical and inappropriateness of the circumstances.
It is a often taken for granted that consumers understand and know about a product after a short education and presentation.. It is unfair to assume. It is unfair to put the blame on the consumers that they have understood fully and the product was what they wanted it and it was their decision to accept.
In this case the consultant had no reasonable basis to justify the recommendation .The client was unable to understand anything.
The consultant was desperate to meet the sales quota
CASE should help to recover the money and also the interest that she would have earned in a FD.
Buyer beware is dangerous and if it is applied as legitimate principle of financial transaction
consumers will become easy victims of unethical and rogue sellers and the incompetent..; September 15, 2008 12:01 AM
Everlearning said...: Five years ago, I was also approached by the bank officer to purchase a financial product. This is also another bad investment. I would lose more than 20% if I do not hold it to maturity.
Hopefully, by the 3rd quarter of next year, I will be returned fully the capital.
If I have kept it in the fixed deposit, I would have $6k if the interest rate is 1%. I was only paid about $500 which was deducted from my capital as the first earnings.
Am I any smarter after this experience? Just avoid having conversation with the bank teller might save your day!; September 15, 2008 7:49 AM
Everlearning said...: Oops! Correction - not $6k but $600 if interest rate is 1% throughout 6 years.; September 15, 2008 2:08 PM
Raymond T said...: Luckily I said no to a very close friend who was pushing regular ILP products some years ago. That friend became very distant from then on... but hey.... my money is still intact =); September 15, 2008 11:06 PM