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The Straits Times
www.straitstimes.com
Published on Aug 29, 2012
Insurance body against fee-based compensation
Alliance representing 15,000 agents warns of job losses, coverage decline

By Aaron Low

AN INDUSTRY alliance representing about 15,000 agents and managers from Singapore's biggest insurers has spoken out against imposing a fee-based compensation model.

The alliance warned the Financial Advisory Industry Review (Fair) panel last week that moving away from the commission-based system to one of paying flat fees could lead to huge job losses and a decline in insurance coverage.

Mr Leong Sow Hoe, who chairs the alliance, told its members in a letter sent after it made its case to the panel: "Any cut in commissions would render some or even most of us out of a job."

The group comprises representatives from eight insurers and two industry associations, making it the biggest group to appear before the Fair panel.

One of the points it raised during the hour-long session with the panel last Tuesday was that agents do not earn anywhere near as much as many people seem to think.

It noted that an agent's median annual income was $33,000, below the $35,100 national level.

The alliance said its research showed that most policies sold were "bread-and-butter" ones such as health plans that charged 120 per cent commissions.

This was less than the 160 per cent commission the Monetary Authority of Singapore (MAS) had cited that whole-of-life policies charged.

It also said a survey of 1,500 consumers it commissioned found that 90 per cent were not opposed to the commission structure.

Mr Leong, Prudential's senior financial services director, ended the letter saying that while Fair "is the hen which contributes an egg for breakfast", agents "are the pigs which would have to be sacrificed for bacon".

"In the meantime, let's stand together and hold our ground."

The insurance industry has been concerned about the implications of the MAS plan to overhaul the sector by lowering the costs of insurance products and raising the quality of advice.

In particular, it has been concerned about suggestions that Singapore could move to a fee-based model like in Britain and Australia rather than commissions earned by agents selling products.
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Quote:The alliance warned the Financial Advisory Industry Review (Fair) panel last week that moving away from the commission-based system to one of paying flat fees could lead to huge job losses and a decline in insurance coverage.

Just nice, can help to supplement industries that are screaming for manpowers.

Wilfred Ling had written on this.
http://www.wilfredling.com/content/view/1637/9/

It is just a matter of time. I will look down on MAS if they do not push forward to remove commission based system.

The industry alliance is totally miss the point in their appeal to Financial Advisory Industry Review (Fair) panel.

The review is to investigate the fairness of the compensation scheme in insurance industry, rather than to curb the income of insurance agents. If income is the issue, insurance agents has to queue behind many professions i.e. banker, lawyer, doctor etc

An industry alliance representing 15,000 agents, is presenting a flaw argument? That represent the fragmentation in the industry. The fee-base compensation scheme will likely be pushed through.

The thing about fee base is what if i know what i want are just term policies and i have decided on the amount i want to cover. I go to a fee base FA company, will i be charged a fee to purchase the Term policies even though i do not need their advise? If no, i question how motivated are those fee based FA going to serve such clients.

I believe fee based FA earn their money mostly from managing investments for their clients. Those are more consistent and recurring income for them. Some provide annual review for their client protection needs and of course comes with a fee.

The best i think is to provide financial education in schools as a subject.

Like the aviva-SAF group term insurance, 1 single point of contact, email correspondences, fill up the application forms and pay giro, policy in force liao.

low operating overhead cost, maximum coverage protection.

Fee based!

(29-08-2012, 08:44 PM)Bibi Wrote: [ -> ]The thing about fee base is what if i know what i want are just term policies and i have decided on the amount i want to cover. I go to a fee base FA company, will i be charged a fee to purchase the Term policies even though i do not need their advise? If no, i question how motivated are those fee based FA going to serve such clients.

I believe fee based FA earn their money mostly from managing investments for their clients. Those are more consistent and recurring income for them. Some provide annual review for their client protection needs and of course comes with a fee.

The best i think is to provide financial education in schools as a subject.

Fee base scheme already there for doctors, lawyer and other professions. If you are confidence, you are always go to pharmacy to buy medicine for minor flu or sickness, instead of consulting a GP. But if you need to be careful, you are always go to GP, knowing the consulting fee incurred.

Same applies to FA.

"The alliance said its research showed that most policies sold were "bread-and-butter" ones such as health plans that charged 120 per cent commissions.
This was less than the 160 per cent commission the Monetary Authority of Singapore (MAS) had cited that whole-of-life policies charged."

wow even private medical shield plans which are bread & butter ones, these commission based agents can milk 120 percent commissions..something i feel the government should scrap off private medishield plans offered by insurers and reinstate real adequate public medi-cover/subsidy to the people..

(29-08-2012, 09:29 PM)CityFarmer Wrote: [ -> ]

(29-08-2012, 08:44 PM)Bibi Wrote: [ -> ]The thing about fee base is what if i know what i want are just term policies and i have decided on the amount i want to cover. I go to a fee base FA company, will i be charged a fee to purchase the Term policies even though i do not need their advise? If no, i question how motivated are those fee based FA going to serve such clients.

I believe fee based FA earn their money mostly from managing investments for their clients. Those are more consistent and recurring income for them. Some provide annual review for their client protection needs and of course comes with a fee.

The best i think is to provide financial education in schools as a subject.

Fee base scheme already there for doctors, lawyer and other professions. If you are confidence, you are always go to pharmacy to buy medicine for minor flu or sickness, instead of consulting a GP. But if you need to be careful, you are always go to GP, knowing the consulting fee incurred.

Same applies to FA.

I think the main reason most pp go to a GP is because they need a MC. Some find it cheaper to see GP because of co-payment by their company. Also, if one need antibiotic for persistent cough, one cannot get it from the pharmacy counter. If condition is serious, the GP will tell u go to hospital to get a blood test. The standard of GP here in Spore imo is dropping.

As for paying for the advice of a lawyer, the english used by lawyers is just too cheem for majority of pp to comprehend. Sometimes i wonder if they purposely use those type of english where only they themselves can understand.

I dont find it difficult to learn/understand simple financial planning. Majority of pp are not so rich where they need complicated financial planning anyway. In fact i think anyone with O level standard can master them in just a term. Certainly not for Law or Medicine.

26 August 2012

Editor, Forum Page
Straits Times

I refer to the letters from Jerry Lam and Phillip Williams regarding their health insurance policies (Straits Times 24 August 2012).

More Singaporeans are relying on insurance to take care of the escalating cost of health care, especially for the elderly.

I urge the Monetary Authority of Singapore and the insurance associations to clarify the uncertainties
faced by consumers when they are faced with stiff renewal terms, changes to the existing coverage, and
exclusions for pre-existing conditions.

Consumers need to be assured that their rights and interests are protected, and that they do not have to incur legal expenses to overcome unreasonable rejection of their claims.

It is also important for consumers to realize that insurance is not the only solution. They should consider other risk management methods, such as loss control and retention of risk.

This should not rely on insurance to pay for expensive and futile treatment that have an extremely low chance of success and does not improve the quality of life.

Tan Kin Lian
President
Financial Services Consumer Association

(29-08-2012, 11:04 PM)Bibi Wrote: [ -> ]I dont find it difficult to learn/understand simple financial planning. Majority of pp are not so rich where they need complicated financial planning anyway. In fact i think anyone with O level standard can master them in just a term. Certainly not for Law or Medicine.

The consulting may not only to obtain a solution for complicated financial planning, but also to tap on the knowledge of the consultant on products available, advice to avoid been trapped on non-claimable in future etc.

Not everyone is comfortable to learn financial planning, and most does not have the time and resource to do their own research to find the best product suitable.

Of course, all this with a assumption, the FA is professional and able to provide the services to you, rather than to himself alone