Insurance consumer's satisfaction is high - according to another consumer survey of 800 individuals conducted by LIA:
- 72 per cent are “Very Satisfied” and “Satisfied” with the life insurance industry as a whole.
- 69 per cent of Life Insurance Users rely on only one trusted agent.
- 92 per cent of Life Insurance Users who went through a full/partial fact-find in the past 3 years say they benefited from the process.
This appears to contradict the MAS mystery shopper survey conducted from October 2011 to December 2011, in which it was found that consumers were recommended mostly unsuitable products. Specifically, only 28% of cases recommended suitable products. 30% were found to be clearly unsuitable and the remaining 40% ‘may be suitable’. Note: 'may be suitable' can also mean 'may be not suitable'.
I believe both MAS mystery shopper survey and LIA survey are unbiased and telling us the truth. The truth is that there is little chance of a consumer buying a clear-cut suitable product (only 28% probability) and yet these same consumers can say they benefited from the sales process! That is to say that the seller can recommend an unsuitable product and yet the buyer still felt ‘benefited’ from the wrong product! Put it this way: consumers do not know what is good or bad for them. Or another way to say is that if a seller sells ice to Eskimo, the Eskimo still feel good about buying the ice! Either the Eskimo is stupid or the seller is good in selling skill. In the financial industry, the seller is good in selling skill but the consumer is confused.
That is why I am against the disclosure-regime or sometime we called it ‘buyer-beware’ which puts the onus on the client. Yesterday, I transacted an shield upgrade and yet the KYC is 13 pages thick. The KYC is even thicker than the proposal form. There are endless numbers of warnings and disclosures on the forms and even questions on whether the client is a terrorist or drug lord or a civil servant who may wish to launder his drug/sex money into the $142 annual premium deducted from the CPF Medisave! [There is some exaggeration* here to bring my point across but those who have to sit in the annual AML/PEP briefing knows what I am talking about]. As I mentioned in my previous blog there are even disclosures to explain the disclosures which itself supposed to explain further disclosures. But is this benefiting the client? No. When a wrong product is sold to a client, the client does not know he/she is being mis-sold! The two surveys conducted by MAS and LIA proved my point.
Therefore, I always advocate that we cannot use the disclosure-regime anymore. It is like medical industry – it is not based on disclosure regime. When I seek medical treatment, I trust the professional skill of the doctor. There is no need to sign endless number of pages of warnings and disclosures because nobody can understand those medical terms. In the mystery shopper did by MAS, a panel of industry practitioners reviewed the survey. This is a very good start because we must move beyond ‘checklist’ and ‘disclosures’ regime. A suitable recommendation is not judged by the fact that the consumer has received all the items in the checklist of disclosures. The suitability of a recommendation is judged by fellow professionals as suitable. The problem is this: 99.999999999999% of financial practitioners are not professionals.
The endless forms filling resulted in extremely poor productivity. Even worst, it still ends up the seller recommending the wrong product and the client still can say he is happy with the process!
I call for the removal of ‘buyer beware’ regime and the senseless disclosure regime. And please remove the requirement to ask the client whether is he going to *launder drug/sex money using the shield.
*Disclosure: It is prohibited to ask the drug lord whether is he going to launder his drug money. Instead, if the adviser suspect the drug lord is going to launder his money, the adviser must activate an escalation procedure without alarming the drug lord that he is being suspected of laundering. But the adviser should ask whether is the client a 'politically exposed' person. All because of the shield plan?
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