Editor, Forum Page
Straits Times
I share the concern expressed by the Alliance representing 15,000 agents
about the potential job losses that may arise from a drastic change in the
remuneration structure for the sale of insurance policies.
In addressing the difficulty challenge of finding a right balance between the
interest of agents and consumers, I urge the FAIR panel to study the extent
to which consumers have been well served by the current practice of sales
through commission.
The cost of selling life insurance is too high, and takes away a large portion of
the modest yield that is earned on long term savings. Most life insurance
policies give a yield of less than 3 percent, which hardly matches inflation. If the
policy is terminated before maturity, it is likely that the consumer may suffer
a financial loss.
Quite often, consumers are sold life insurance policies that do not suit
their long term financial needs. In recent years, I have received many requests from
consumers for advice on their insurance products and have
become quite familiar with the mis-selling practices.
The regulators in the United Kingdom and Australia have decided that there is
no way to prevent the mis-selling, other than to ban the
payment of commission on investment type products. This ban does not apply
to the payment of commission on pure insurance products that
do not promise an investment return, such as health or term insurance.
Of the 15,000 agents that could be impacted by a major change, a large number
are probably university graduates who have recently entered into this field. They could
be more usefully deployed in other sectors of the economy.
The consumers could be better served by a smaller number of competent advisers who
give financial planning advice to address their long term needs, such
as managing their budget, debts, long term savings and insurance protection
in a more flexible and holistic manner.
This type of advice should be given for a fee and should not be tied to commission
payable on the inflexible and costly products that are being recommended
to consumers.
If the FAIR panel decides to allow the continued payment of commission, they should
set a cap on the rates of commission payable on various types of products at levels
that are fair to consumers and agents. This is the practice adopted by most other countries.
Tan Kin Lian
President
Financial Services Consumer Association
President
Financial Services Consumer Association
4 comments:
I agree with you , Mr. Tan that insurance agents should play an advisory role and not a trafficker of toxic products.
The toxic products are as expensive as drugs too.Is this how agents make a living? Poison the customers and live off the hefty commission? to feed their family with ill-gotten gains? How would their children feel that they are in the university with money plundered from their poisoned customers?
I know the agents are not competent to give advice .They have been salesmen although they have titles like financial consultants.They are like wolves in sheep's clothing. Now the game is up and their incompetence is in the spotlight, they are shivering in the pants or skirts.
The number of agents should be reduced to half. Now it is the time to reduce them because as many as 90% of them are unqualified and unsuitable for this job as real financial consultants.MAS should take this opportunity to clean up the indsutry like India did in 2009. MAS should protect the consumers from these incompetent agents. The under insurance is due NOT ONLY to high cost of the products but also to the incompetence and conflict of interest.
The baby boomers have suffered in their hands too. Many cannot retire because the insurance agents never planned for them but sold toxic products to them that fall short of their needs.
MAS, it is NOW or never. Follow Australia and UK and the rest of EU countries which are considering banning the commission.Hong Kong , NZ are watching before adopting.
zhummmeng
Please be moderate in your choice of words. I agree with your points, but I find it uncomfortable to approve your post when it is insulting to agents. If possible, please delete your post and re-post it with more moderate words. Thanks.
I believe MAS's FAIR could just be a show with no concrete action but some hot air. If you are thinking that fee-based model is going to replace commission-based model, you are day-dreaming, it won't happen.
1. No country has proven that fee-based consultation works - it is only in theory. UK and Aust remained more underinsured than before - Singapore is better insured than both countries. Singapore will not be the first to try this out.
2. As pointed out correctly, only the well heeled can afford the fee-based consultation. The mass population will not wake up one day and wake into an insurer and say they want to buy insurance. Insurance is always sold.
3. What does MAS stand to benefit from implemenation of fee-based? Nothing. But if they keep the current commission model, they will have cooperation from all the financial institutions when they want to introduce other policies in the future.
4. The most MAS can do is to make some recommendation, for e.g., ask the financial institutions to work on their T&Cs and/or conduct more training courses and get their advisors to get some international recognised qualifications like CFP/CHFC etc.
5. Commissions to the managers and upwards may be reduced but rewards come in other forms; however insurance policies will not be cheaper for the consumers.
6. FAIR will be all bark and no bite. Don't need to place so much hope. Most of us are still doing the same thing since day one. We are not too bothered about FAIR. But we have to act, act a bit lah. Take some courses, adhere to some extra T&Cs guidelines, and that's it. Anyway the T&Cs are meant to shift all the purchasing responsibility to the consumers and absolve the financial institution of any mis-selling, so it is better this way.
7. In fact, FAIR's eventual outcome (or non-outcome) would help us sell more because it would be an endorsement from MAS that fee-based is not suitable for Singapore and commission-based sales is the right and best option for the consumer and the financial institution. :)
In summary, we are expecting status quo, with some emphasize on upgrading, internal training and taking up of courses and strong emphasise on T&Cs (to shift all decisions to buy to consumers and relieve financial institutions of any responsility of misselling and/or misrepresentation).
*yawn*
Excuse my language in my early post, Mr. Tan. I can't help but to use strong language to give emphasis to the opinion i have of these people. They have become so despicable that they have no thought of the people who buy and support them.There is no fair dealing which MAS has been stressing to the insurance companies but none paid heed to the call.Mis-selling is still rampant and as you saw even a senior management of a local insurer boldly, openly and shamelessly came forth to support an inappropriate recommendation by an agent who tried selling a regular ILP to an old woman in her 60s. It is either challenging the regulator or he was showing off his incompetence..
I commend you for what you are doing for consumers and I have not seen anyone taking up the cudgel for the right of consumers to fair and responsible financial planning.
Hope consumers will attend your talk to learn something about financial product to protect themselves from the many rogues in disguise as financial consultants.
May you be blessed for this national service to the people of Singapore..
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