Someone asked why it is necessary for an insurance agent to disclose the commission earned on selling an insurance policy, while sellers of other products are not required to disclose their commission.
The answer is, the insurance agent is supposed to give advice that is in the best interest of the client. The payment of commission create a conflict of interest.
The commission is paid indirectly by the client, from the premiums. A high commission means a high cost to the client.
The regulators in the UK, where this concept of disclosure was developed, thought that the disclosure was the best way to manage the conflict of interest. If the client is aware about the cost, the client would be able to evaluate the advice of the agent.
This belief has turned out to be naive. The consumers were not savvy. The advisers were able to hide essential facts from the clients or to give misleading information.
I understand, from comments posted in this blog, that the UK authorities have now decided that this "disclosure" does not work and intends to ban the payment of commission entirely. I have not been following this specific development, so I am not sure about the details.
I agree with the thinking that it is better for insurance advisers to be paid a fee for their advice. Some practising advisers also hold the same view, as they prefer to be transparent in their dealings with their clients.
Tan Kin Lian
- ► 2013 (298)
- ► 2012 (1270)
- ► 2011 (1873)
- ► 2010 (2369)
11/15 - 11/22
- SCMP:Ex-DBS broker suspended over Lehman debacle
- Socialist Market Economy - China's Key to Success
- A better way to pay doctors
- Health care reform in the USA
- Action to cool down speculation
- Visit to INRIA, Paris
- Reforming the financial sector
- Dr. Lim Hock Siew speaks out
- How to spot an investment scam
- Globalization - some bad consequences
- Public transport in London and Paris
- Wealth manager
- Disclosing the commission earned
- Personal entertainment system on air flights
- Changi Airport can adopt the best practice
- Paying the right price for insurance
- APEC Leader's declaration at Singapore 2009
- How lawyers overcharge clients
- Consequence of widening income gap
- Marketing of holiday and spas
- CyCab - Driverless Electric Vehicle (2)
- Need to create more jobs
- Managing to survive tough economic times
- Unemployment worse than projected in USA
- Virtual wallet
- Low birth rate and immigration
- Insuring critical illness
- Choice of modes of travel
- Distributor of torchlights
- Practice your skills in financial trading with Pro...
- Fee on bank overdraft
- Cap on interest rate and bank charges
- Overdraft protection
- Low interest rate - the underlying cause
- A recovery for some
- Experience with locator torchlight
- ▼ 11/15 - 11/22 (36)
- ► 2008 (2105)
- ► 2007 (1803)
- ► 2006 (696)
- ► 2005 (159)