Insurance is a vital and necessary product to allow individuals to hedge against the risk of medical costs.
However, consumers nowadays are often inundated by hybrid insurance products, such as investment-linked products and endowment plans. These products are more complicated and subject policyholders to greater financial risk, something which is not easily understood by the layman.
To add to this problem, such products, which yield greater profits for the insurance company, also award higher commissions to the agents.
The combination of these two factors results in the consumer being at a disadvantage by being recommended products with an inherent bias by the agent, as seen in many cases of mis-selling.
The problem is not "black sheep" agents. Rather, if we delve into the heart of the issue, what is needed is an industrywide overhaul of agents' remuneration.
Instead of commissions varying from one product to another, a fixed rate should be implemented to give the consumer the added security that he is being recommended the most suitable product, not based on the commission incentive of the agent.
Society by and large would benefit from the positive externalities created through the appropriate recommendation of suitable policies. It is only through more stringent regulations that this can be achieved.
Victor Vong Hansheng