Commission for life insurance agents

A life insurance agent argued that the agent has to incur high expenses and deserve the commission that is paid. This is only one part of the story, as seen from the perspective of the agent.

The agent should also see this issue from the perspective of their client. The agent has a duty to take care of the interest of the client. This includes recommending a suitable life insurance product that is good for the client. In the case of an investment plan, there is a duty to advice a plan that offers a fair return for the long term savings. In the case of a term insurance policy, the agent has to recommend a policy that charges a fair rate of premium (but does not need to be the lowest).

The problem arises when there is a conflict of interest. Many agents recommend a policy that pays a high  commission but this is at the expense of the client (who trusted the agent). The agent is trained to give the marketing  reasons to sell the policy, but they are not honest advice.

Some insurance agents behave worse. They approach the client every few years to get the client to stop an existing policy and take up a new "better" product. The agent earns the high commission once again, and the unsuspecting client is being taken "for a ride" and to incur a high cost again. This is how the financial future of many consumers are destroyed by the bad advice given by some unscrupulous agents.

There are some agents that behave ethically and recommend honest products that are good for consumers. The difficulty is for the consumer to tell one agent from another. This is why consumers have to be educated about insurance. My book on financial planning is aimed at achieving this goal. There is a chapter about dealing with financial advisers or insurance agents.

Several countries are now implementing legislation to ban the payment of commission on life insurance products. The agent has to earn a fee to provide financial advice to the consumer. Singapore should follow the same step, to safeguard the financial future of the ordinary people.

Tan Kin Lian