Last Updated on 13, January 2016
Recently, a number of Members of Parliament wanted the government to regulate the Integrated shield plans to prevent profiteering. I feel that regulation to prevent profiteering should not be encouraged in the free market system like Singapore as it gives the impression that the pursue of excellence in making good profit is bad. Whether profit is good or bad depends on whose perspective.
A shareholder of a company will view it as good while a consumer would view it as bad. Is the shareholder a lesser person compared to a consumer? Often, the consumer is also a shareholder of a profit-oriented company. Moreover, if profit-oriented companies provide jobs and give good bonuses to its employees, who is to say that it is profiteering?
The word ‘profiteering’ gives the impression that earning outrageous profit is wrong. But the issue is who is to say exceeding (example) 30% of profit margin is bad? Why is 29% good but 30% bad? Where do we draw the line?
Dr Amy Khor , the Senior Minister of State for Health, said that although 60% of Singaporeans have Integrated shield plans, not many people know that their integrated shield plans include Medishield. Hence, the government will put a ‘human face to the message’ to help integrated shield plans policyholders understand how their plans work with MediShield Life. This means the need for the government to harness huge resources to deliver ‘this message’.
As I do not entirely agree to regulate how much an insurer earns and at the same time felt that the government can better channel its resources to elsewhere, I decided to write to the Straits Times. The following was published on 22 July 2014 Straits Times forum page:
SOME MPs have suggested that Integrated Shield Plans (IPs) be regulated to prevent profiteering ("MPs suggest regulation for Integrated Shield plans"; July 10).
I suggest that the regulators look into why the market for IPs is not competitive in the first place, giving rise to the perception of profiteering.
If there were free competition among the five insurers offering IPs, such plans would be priced fairly.
But this is not the case at the present moment.
One reason is that four out of five financial advisers in Singapore are "tied-agents" who can sell IPs from only one insurer; independent financial advisers are in the minority.
Very often, the consumer is unable to make an informed decision when purchasing an IP, as no comparisons are made with other IPs.
Would it not be better if the Government mandated that all financial advisers carry IPs from the five insurers?
To prevent any conflict of interest, commissions could be standardised across these IPs.
The influence of financial advisers cannot be underestimated. They are responsible for the huge number of IPs sold to two out of every three people in Singapore.
This brings me to the next point that financial advisers have always been the "human face" in educating their clients on financial matters ("Putting a 'human face to the message' "; July 10).
They are well positioned to explain to clients how IPs and MediShield Life work - which many Singaporeans do not understand - beyond just the nuts and bolts.
A major reason why Singaporeans have such poor financial literacy is the poor training provided for financial advisers.
Very often, the training they are given involves sales and marketing. Any technical training is for their own products, with little emphasis on government policies.
Since educating clients is part and parcel of the insurance sales process, I suggest that the Government conduct technical courses for financial advisers, especially on topics related to government schemes, as part of their continuing professional training.
Government agencies providing training to private-sector professionals is not new. For instance, the HDB regularly conducts continuing professional development courses for real estate agents.
Update 13 January 2016
The government did not reply to this forum letter. However, MAS/MOH implemented my suggested training for financial advisers. With effect from 1 January 2016, all financial advisers must undergo compulsory 2 hours training for Medishield Life every year! Opps..
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