I am not able to tell you this in the public as the insurers will be quick to issue lawyers’ letters to me. Nevertheless, in Singapore history many insurers have earned themselves a very poor reputation for mis-representations and treating their policyholders unfairly by focusing too much on profitability. The older policyholders will know which of these insurers are but the younger customers will not be aware. The following are some examples of how some insurers have earned themselves a very poor reputation:
- By providing over optimistic projections of the insurers’ participating policies, they subsequently reduced bonuses when reality caught up with them. This problem affected the ENTIRE industry except one insurer that honored their own projections. Many policyholders were enticed by the high projections when they bought their policy.
- By selling “limited premium” whole life policy when in reality it is not as it depends on the projected cash values. Many policyholders were misrepresented into thinking that their life policy was limited premium but this was not true.
- By reducing terminal bonuses to ZERO. As terminal bonuses represents a huge portion of a policy when it is matured or surrendered, the cutting of the terminal bonuses of those policy that matured or surrendered in that particular year is now well known among practitioners as the insurer being “merciless.”
- Not disclosing the escalating mortality and morbidity charges in an investment linked insurance policy. Many earlier policyholders were completely unaware of the charges involved in an ILP. These non-disclosures were common in earlier years. It was only recent that charges were disclosed but even so financial advisers selling ILPs tends to “gross” over the charges and deemphasize the importance of it.
Because all insurers are profit maximization entities, it is my principle to advise my clients not to purchase all their insurance needs from one insurer. It is more prudent to diversify across multiple insurers. Moreover, you can never know which one will collapse. After last year’s financial crisis, any company regardless of size can collapse.
For more information, look at these articles: Unethical sales process
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