Insurance industry failing to look after customers' interests

I am an actuary with nearly 30 years' experience working in the insurance industry all over the world.

I left the industry two years ago. Lindell Lucy ("Strengthen licence requirements for insurance agents", July 19) has articulated perfectly the reasons why.

The fact that the Hong Kong Federation of Insurers is waiting to be given guidance on what "clients' best interests" means is telling enough in itself. Why isn't it capable of coming up with its own definition? What other trade, industry or profession waits for someone else to tell it what its customers' best interests are?

The insurance industry worldwide limps from one mis-selling scandal to another because it looks after its own interests first and consumers' second. It preys on customer ignorance and designs policies that are incredibly difficult for most people to understand.

Even if the legislature did come up with a definition, I guarantee that each insurer would look for the grey areas that it can fudge by issuing reams of policyholder documentation, internal guidance notes and hiring additional compliance officers, all designed to get regulators off their backs but that in reality do nothing but obfuscate.

Many policyholders have no idea what they've bought nor when (or if) their policies will pay out. Lindell Lucy is right - most people would get a much better deal elsewhere, and the agency and quasi-agency bancassurance distribution systems are to blame.

All insurance companies know this - their customer research tells them this - but not one does anything about it.

Most Hong Kong-based regional players are now focusing on plying their trade in markets with poor consumer knowledge, weak regulatory structures and inadequate enforcement agencies, all similar to the ways the tobacco industry operates.

First-year policyholder lapse rates (proportion of policyholders who cancel policies in the first year) are a good indication of how well insurers really look after their clients' best interest - lapse rates in these new markets are nothing short of horrifying.

Every insurance company has staff and executive bonus schemes that pay out when the company meets a series of "alpha-male" targets such as growth in the number of agents, new annualised premiums sold and assets under management. These bonus schemes never make any mention of executives looking after their clients' best interests. Perhaps that's where the legislature should start?


Lee Faulkner, Kennedy Town
Source South China Morning Post