The consumer watchdog and financial experts have spoken out against the inappropriate selling of insurance products.
On Monday, The Straits Times highlighted the plight of administrative executive Corinne Han, 57, who was sold an endowment plan two years ago at United Overseas Bank (UOB).
She is now unable to continue with her PruSave Max Limited Pay plan as the yearly $40,000 premiums, payable for five years, are higher than her annual pay of about $30,000. So far, she has paid $80,000.
Mr Seah Seng Choon, executive director of the Consumers Association of Singapore (Case), cautioned that according to the fair trading requirements, a financial adviser who sells an investment product that is beyond the ability of the consumer to service is in breach of the rules.
He said: "For cases such as this, there is a possibility that either the financial representative did not do a proper financial determination of the consumer's ability to pay or he did not communicate the risk the consumer has to bear after evaluating the consumer's financial status.
"I expect UOB to conduct a thorough investigation into this matter as the conduct of this representative could undo the good work of those who have diligently upheld the reputation of the financial industry. I expect UOB to take full responsibility for the action of its representative should he be found culpable and ensure that the consumer is not disadvantaged as a result of the lapses of its representative."
Madam Han visited UOB to open an account in 2013. She ended up purchasing the Prudential policy that came with freebies like an air-fryer and a steamer.
Many readers have responded to Madam Han's dilemma, empathising with her and sharing unhappy experiences buying insurance.
A financial practitioner, who declined to be named, questioned if UOB had fulfilled its legal obligation to have a reasonable basis for its recommendation. "What was the basis for deciding that a person with a $30,000 yearly income could service a $40,000 annual premium over five years?"
Mr Patrick Lim, associate director at financial advisory PromiseLand Independent, said in addition to comprehensive fact-finding, it is important to ensure customer affordability and his ability to pay premiums throughout the plan tenure.
He added he would not recommend endowment plans that offer a guaranteed maturity cash benefit lower than the total premiums paid. The guaranteed maturity sum of Madam Han's plan is $181,000, less than the $200,000 in total premiums.
Case said that insurance is about trust and consumers will expect fair returns to their investment.
"Most consumers will not be sophisticated enough to compute and determine the negative impact on their investments and are therefore vulnerable to questionable products sold to them," added Mr Seah.
A UOB spokesman told The Straits Times: "We are in the process of working with Madam Han to come to a suitable resolution."