Tuesday, December 07, 2010

Blatant cheating (3)

An unwary consumer was cheated by an insurance agent into buying an investment linked policy (ILP) with an annual premium of $40,000. She thought that she was investing $40,000 in a unit trust. The agent assured her that she would get a better return.

She did not know that the annual premium ILP would take away more than 1 year of her savings. She was not given the benefit illustration and did not receive the policy document. The half yearly statement showed by the insurance company indicated the fund value to be quite close the the invested sum, but the surrender value to be only 10% of the fund value. She did not understand what the surrender value meant.

When she asked the agent for explanation about what was happening to her investment, she received vague and evasive answers.

MAS relied on the board of directors and top management of insurance companies to have a process to govern the behavior of their insurance agents. It is not clear about what is required to be done.  Surely, if someone buys an ILP with an annual premium of $40,000 and the insurance agent (and agency manager) is likely to earn more tan $40,000 in commission, an enquiry should be carried out to make sure that the customer is aware about the surrender charge?

If this is not happening, what is the MAS requirement for? Is it just to appear good? Is MAS interested to know the details of this case? Will their official, who is monitoring my blog, contact me?

Tan Kin Lian

8 comments:

look4kc said...

Well done Mr Tan, i read yr blog almost daily and find this act of yours heroic.

There are many cheats being borned out of our modern cosmopolitan capitalistic Singapore in which everything is money driven.

The panelty for cheating is not in place, just take a look at the NKF case whereby charitable money and kind souls' contributions were cheated and the biggest cheat was only punished with a showcase 3 months jail term.

Isn't this an encouragement for people to cheat? Thereafter many more charity cheatings were surfaced because the panelty is just too light.

Why is it that the rich got away lightly and the defendless poor bears all the pain?

There is no more heart or humanity in the system here.

We need someone like you with big multinational experience and a kind heart to be our next president to put things right.

kk003 said...

I hope to hear from MAS explanation on this matter. I feel that MAS is just crossing their arms, standing aside and seeing.

Vincent Sear said...

In a regular premium ILP of S$40,000 p.a., the sum assured should be more than a million. Beside medical underwriting, what has the company done about financial underwriting?

Most regular premium ILP have zero unit allocation in the first year. Therefore, as her statement shows close to full unit allocation, it still looks to me more like a recurring premium SP-ILP where the sum assured on S$40,000 is probably only around S$50,000.

The unit balance is there but non-surrenderable because a hefty upfront commission and overriding has been paid to the agent and the agency (instead of the normal 3 to 5% upfront in straight SP-ILP).

This commission and overriding shall be recovered in case of early surrender, lapse. If the policy is upkept, it shall be recovered from the unit price spread from new units bought with new premiums through the years until at certain year where expenses are computed to have broken even and all units can then be surrendered for cash.

zhummmeng said...

As many as 95% of insurance or investment products sold fail to meet the reasonable basis of section 27 of the FAA.
Why? because these products are being pushed as products, as ends in themselves for commission. Product pushing short changes and deprives the customers of the much needed solutions and customers are clueless that they have been conned.Customers are ignorant and clueless about the products and needs.
MAS must ban option 3 , product advice option to stop all these unethical practices and conflict of interest inherent in product pushing. MAS must make need based approach a must and not only that all cases must meet section 27 of the FAA for reasonable basis of recommendation failing which will land the insurance agents by whatever title are considered to have breached the law punishable by suspension, fine or jail or all.
Breaching the FAA should implicate the supervisor of the agents and the senior managers for colluding to cheat the customers which amounts to abetting the agents in the commission of the crime.
MAS must enforce the FAA if it wants to be seen as impartial and concerned about giving the customers fair dealing outcomes.
Currently the customers are getting rotten deals without their knowing it like the case in point.

Wilfred said...

In a regular premium ILP of S$40,000 p.a., the sum assured should be more than a million. Beside medical underwriting, what has the company done about financial underwriting?


Not likely it is your usual regular premium ILP. Likely it is an ILP of which the sum assured is 100% of unit values. These ILPs are actually just pure investments. No financial underwriting nor medical underwriting required.

Lye Khuen Way said...

I think whoever tasked to monitor Mr Tan' blog, is waiting for a 'police report' which in Singapore appeared to be another impossible task !I am prepared to take my words back. Anyway, can the PMO advise ?

Bai Hu said...

I was hoodwinked too into buying some similar policy like this, but of course mine is a smaller value. I got into it because i 'trusted' my uni schoolmate who was just starting out in an insurance-investment career. Never do i know that she has hidden so much info from me like the risk-level, principle-guranteed or not, surrender value & break-even year, management fee amount, etc. I just find that all these agents are all crooks, even if they claimed to be your friend.

zhummmeng said...

Bai Hu,
now you know..They even cheat their relatives...so what so great about friend. Where there is money friendship can take the backseat, right.. Money can change character.
Anyway , insurance salesmen and women are crooks without conscience.

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