Although most people know him as a former Presidential candidate, Tan Kin Lian previously spent 30 years as the CEO of NTUC Income, one of the largest insurance companies in Singapore. Given his credentials, few people are more qualified than he is to evaluate practices within the insurance industry.
In a letter published in the South China Morning Post on August 12, Tan Kin Lian fired back at Peter Tam, chief executive of the Hong Kong Federation of Insurers, who previously accused him of “seriously misunderstanding” the insurance industry’s stance on reforms.
Tan Kin Lian wrote:
“I am glad [Peter Tam] has affirmed that “the insurance industry fully supports the principle of acting in the best interests of policyholders”.
The starting point must be for the insurance companies to design products that are fair and suitable for consumers.
It is difficult to see how an investment linked assurance scheme or life assurance policy, which pays a large upfront commission to the agent or financial adviser, can be in the interest of consumers who are looking for a fair return on their investment.
In some cases, the products are designed to hide the commission by using back-end charges that are not transparent to consumers or purport to give a bonus that is taken back by the back-end charges. This is an unethical practice, which could amount to fraud.
If the products are bad in the first place, I do not see how “requirements in the sales process to help ensure customers make informed decisions” could make these products good for consumers.
Tan Kin Lian’s observations are an indictment of the insurance industry’s hypocrisy. Most notable was his suggestion that large hidden commissions and phony bonus units might be a form of fraud—a crime punishable by up to 14 years imprisonment in Hong Kong.
I strongly believe that Tan Kin Lian is correct, and I recently explained why in the following article:
Tan Kin Lian’s entire letter to Peter Tam can be found HERE. Look under the heading, “High charges cannot be justified“.