Insurance sales: More info, less
understanding
I AGREE with Ms Elizabeth Tan Boon Kwan ("Guard against
overselling of insurance products"; Thursday).
Although she bought her policy before the
introduction of the Financial Advisers Act in 2002, several
financial advisers continue to oversell the benefits of insurance
policies even today.
Investment-linked policies, for instance, are often
marketed as having the benefits of both insurance and
investment.
In reality, many of these policies' insurance
charges rise in an exponential fashion as one ages, resulting in
these policies lapsing because the policyholders are unable to
continue paying the premiums and the cash values are insufficient
to cover the shortfall. Many young policyholders will realise this
problem only after 40 years.
Although this was highlighted in the media, little
has been done except the requirement for greater disclosure in the
form of more benefit illustrations.
This brings me to the next point - the amount of
documentation a client needs to read and sign has become too
large.
The irony is that such information overload results
in the client understanding less. Of course, this is where the
financial adviser steps in to advise and assist, but there is a
conflict of interest.
In Singapore, financial advisers are required to
recommend products based only on a "reasonable" basis; there is no
fiduciary requirement.
I suggest the Government consider the model adopted
in the United States, where a Registered Investment Adviser has a
fiduciary duty to look after the interest of the client.
Wilfred Ling
Forum, The Straits Times, Saturday, January 3, 2015, Pg A37
