July 2, 2012
Fee-based model could deter many from taking out policies, says Prudential's Asia insurance chief
The chief executive of insurance at Prudential Corporation Asia fears that moving the remuneration model to a fee-based one could leave even more people underinsured.
Hong Kong-based Mr Tony Wilkey said a fee-based system where the client pays up front for advice could deter many from taking out policies.
In a recent interview with The Straits Times, he said: 'It is a different value proposition for the consumer to write a personal cheque in advance to get the advice before a product is delivered.
'The affluent customer is more likely to pay, but historically in other countries, the mass market consumer has not been seen as willing to write cheques.
'This concerns me because if they are unwilling to pay for advice, then the likelihood of them purchasing what the family needs could be impacted. Theoretically, we could end up increasing the underinsurance gap.'
Great Eastern chief executive Chris Wei and Manulife chief Annette King have also raised similar concerns.
Mr Wilkey was commenting on the sweeping reforms that are likely once the Financial Advisory Industry Review (Fair) set up in March by the Monetary Authority of Singapore is completed. The review's aim is to lower the cost of insurance products while raising the quality of advice given by agents.
A key proposal is to relook the tiered remuneration structure where the customer pays commissions not only to his agent but also his supervisors.
The 13-member review panel, which comprises representatives across industry associations and other stakeholders, will make its recommendations by the fourth quarter of this year.
Mr Wilkey said: 'Within Fair, we embrace the proposals focused on qualifications of advisers, and those that increase professionalism in the industry.
'However, the variable income basis that rewards advisers on what they sell has worked quite well so far. Changing to a fee-based structure can have unintended consequences.'
Source: The Straits Times - 3 July 2012
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