Concerned about widespread financial illiteracy in Singapore and a rapacious financial industry dead set on ripping off everyone it comes across, a group of young Singaporean social entrepreneurs created a website devoted to addressing this problem: Dollars and Sense (D&S).
They write on a wide range of topics, but their articles on insurance are particularly interesting, as the subject matter is just as relevant to Hong Kong as it is to Singapore.
The most pertinent article at the moment is one called “The Insurance Industry – A business of unethical profiteering?”
It was written in response to a Straits Time (ST) article entitled “Reigning in Unethical Insurance Practices“, which described how players in Singapore’s insurance industry completely undermined the push for reform, a phenomenon that seems to be happening in Hong Kong right now, as the Legislative Council finalizes a bill which will establish an allegedly “Independent” Insurance Authority.
According to the ST article:
“SINGAPORE’S commission-based system for insurance agents has often been cited as the main cause of unethical selling of insurance products.
The criticism goes that agents push particular products to land higher commissions for themselves, rather than recommend those suitable for the consumer.
This longstanding problem was one reason behind the Monetary Authority of Singapore’s (MAS) launch of a comprehensive review of the industry last year [FAIR].”
“The panel concluded that Singapore is not ready for a fee-based advisory now.”
As one D&S writer pointed out, the conclusion was a total fabrication, pulled straight out of the industry’s ass. There was no evidence suggesting that “Singapore” wasn’t ready. Only pushers of ripoff products weren’t ready.
“Those who support the move towards a fee-based scheme for the agents attribute the backtracking on this issue to the huge resistance put up by the big boys in the industry.
Almost every major insurer – Great Eastern, Manulife, Prudential and AIA – stated their views opposing the fee-based structure.
Financial advisers were also up in arms, meeting regulators behind closed doors to state their cases, and even holding a media event to get their point across.”
D&S responded to the article thus:
“Have you ever wondered why insurance agents and companies are always in the news for misselling and hard selling their products? Its easy enough to understand that they receive different amounts of commission for each product and are naturally going to sell the products which give them the highest paycheck at the end of the month. We are not going to argue on the moral hazard of that system, we think more than enough people have given it enough publicity.
But have you ever wondered why the government doesn’t do anything about it? This is where [the ST article] comes into play. A review panel was set up, but they concluded that Singaporeans were not ready for a change, and that hard selling is fine – essentially. It wasn’t surprising that experts in the field vehemently lobbied that we maintain our status quo instead of changing to a fee-based system, where insurance agents become the professionals selling us the advice that they are able to offer, rather than the products that they have.”
“We at DollarsAndSense.sg fail to see how the fee-based system wouldn’t work in favour of consumers, other than there might not be as many insurance agents and the “reach” of the institutions diminishes. And when we say “reach”, we actually mean cold calling, hard selling and heckling on the streets and over the phone.”
In a more recent article entitled “5 Myths Financial Advisers Would Like You to Believe“, D&S reiterated its support for replacing a commission-based system with a fee-based one:
“Not all financial advisors are cheats or liars. But we will sign the contract if you throw in free luggage bags and PCs.
Financial Advisors. Even the job title is misleading. Let’s face it, these “advisors” are more in the business of being a “salesperson”.
The insurance companies consider the “advisors” as part of their sales team. Moreover, the advisors are paid on their sales performance, and not the quality of their advice.”
“…This is the reason why we propose for a fee-based system rather than one that is sales-based.”
D&S has written nearly a dozen different articles on problems in the insurance industry. Below are a few provocative excerpts.
“For years, many young Singaporeans have been plagued by the dreaded reality of having a close friend become an insurance agent. No one likes losing a friend.”
“In this article, we want to bring to your attention that there is a certain amount of mis-selling going on the insurance industry. And the easy prey are most likely your parents and grandparents.”
“Insurance is good, yet somehow it sounds like a negative word in our society. Unwanted soliciting, misrepresentation of products and plain horror stories such as insurance agents going to old folks HDB estates to sell insurance plans to the elderly only serve to portray the negative image of the industry.”
The writer offers several warnings, among them:
“DO NOT let your potential agent buy you a drink, or a fancy dinner for that matter. You do not want to feel obligated to buy something that will cost you $2k a year, for the next 30 years, just because you drank the coffee at Starbucks.”
For those who want to read more, below is a complete list of Dollars and Sense articles on insurance:
Case Study: Mis-selling (June 2, 2014)
The ABCs of Buying Insurances in Singapore (March 29, 2014)
A Must-Read Article Before Buying Any Insurance in Singapore (March 17, 2014)
The Myths and Realities of Insurance (Dec. 30, 2013)
Avoiding sticky insurance situations in Singapore (Oct. 26, 2013)
5 Myths Financial Advisors Would Like You to Believe (Oct. 15, 2013)
Insurance Industry Review By MAS: Is It Enough? (Oct. 4, 2013)
The fine prints of health insurance (Sept. 12, 2013)
Straits Times Article
Reigning in Unethical Insurance Practices (Straits Times – Jan. 29, 2013)