Tighter rein needed for industry
THE heat is being turned up by regulators on the insurance industry. For a long time the industry has been seen by some of the more respectable parts of the financial services industry as a cowboy domain, where hoards of insurance agents roam apparently free of proper regulatory supervision.
Hong Kong government authorities have focused their attention and resources on regulatory reform in the securities and banking sectors over the last 15 years. Regulation of insurance, both general and life, has tended to lag behind developments in the industry. This has got to change.
More needs to be done to protect the interests of consumers at the point of sale.
Insurance companies and small, apparently independent financial advice companies regularly put up token codes on practice and ethics. This type of initiative in practice turned out to be more of a publicity ruse for the companies or associations concerned than a really serious attempt at raising industry standards. Unlike in the securities industry, we have yet to see a major public censure, or suspension from doing business, of a named insurance agent and employer for malpractices.
The Securities and Futures Commission appears to be raising the ante in a bid to get insurance abuses profiled and hopefully curb some of the worst excesses now going on. The regulator's actions, however, are limited by a lack of resources.
Should the current wave of complaints in the industry grow, the industry's credibility, or what is left of it, will come under threat. As in the United States in the 1970s and in the United Kingdom in the 1980s, abuses and scandals will get to such an extent that the industry will find solutions being imposed on it. It cannot be said that in all cases these solutions have been appropriate or effective in stopping abuse. They cost a lot of money, though.
Insurance market conditions are not getting easier, making marketing and sales directors more reluctant to take a more prying look at exactly what their agents are saying to customers. Are the best practices being exercised? Sadly for the customer, many times they are not.
When financial advice is good and appropriate, it can provide a major source of financial comfort and support to a person and their family's lives. At all times customers need to be alert to what they are signing.
When financial advice is bad, and commission appetite has got in the way of actually serving the customer, customer financial loss, disputes and general misery can result.
If there is more pain than pleasure you can bet there will be prying hands from outside the industry demanding change and curbs on insurance sales industry excesses.