SINGAPORE: Complaints against insurance firms shot up in 2023 while those concerning financial advisers fell.

       Life insurers were the subject of 51 market conduct-related claims, as such complaints are termed, in 2023, up 38% from 2022.

       Financial advisers fared far better with only 16 claims, down 45%, noted the Financial Industry Disputes Resolution Centre (Fidrec).

       Fidrec defines market conduct issues as any kind of misconduct, including misrepresentation, mis-selling, making inappropriate product recommendations and failure to adequately share or disclose key material information or risks.

       The centre helps consumers resolve their disputes with licensed financial institutions, including banks, finance companies, life insurers and advisers, either through mediation, or failing that, via adjudication.

       Chief executive Eunice Chua said that while Fidrec handles a relatively small caseload, she had heard anecdotally from the insurers that they still deal with “quite a large number of claims” directly.

       Fidrec is typically the next port of call after disgruntled consumers fail to reach an agreement with their insurer or financial adviser.

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       Market conduct disputes arise because insurance agents or financial advisers earn a fee from selling a product to the client.

       The commission-based model “creates conflict of interest”, said Eddy Cheong, chief executive of Havend, an insurance advisory firm that opened for business on Feb 27.

       While the firm receives commissions from products it sells, it seeks to cut out conflicts of interest in a few ways.

       Havend’s financial advisers are not compensated based on the commissions they bring in, but by the number of clients they serve.

       This is intended to motivate advisers to focus on giving the right financial advice, rather than be tempted to oversell to earn more commissions, Cheong added.

       Havend’s website also outlines the commissions it receives for different products.

       Cheong hopes this will deter his advisers from recommending only insurance policies that will bring in higher commissions.

       Clients can also see for themselves how much commission they will be charged for each product and make informed decisions on which ones they prefer.

       Despite these safeguards, if the firm and its advisers are found to have oversold products, the client can claim back any excess premiums within 365 days from the start of the insurance policy.

       This is different from the 14-day free look period that all insurance companies grant to allow customers to review policies they have signed up for.

       If a customer changes his mind and informs the insurer within 14 days, the policy will be terminated, and any premiums paid will be returned.

       Financial advisers and insurance agents here are regulated under the Financial Advisers Act. This obliges them to disclose all material information about products they are trying to sell.

       They must also have a “reasonable basis” for making recommendations on products.

       This puts the onus on advisers and agents to understand the client’s financial situation, risk profile and needs.

       There are enhanced levels of requirements for more vulnerable customers, known as “selected clients”, such as the need for a trusted individual to be present during the sales and advisory process.

       A “selected client” is over 62 years old, not proficient in spoken and written English, or with few academic qualifications (below secondary school).

       Chua noted that Fidrec submits a summary report of the complaints it receives every quarter to the Monetary Authority of Singapore (MAS), as do financial institutions.

       These allow the MAS to identify any areas of concern and take remedial action.

       While there are checks and balances in place, consumers have a part to play too.

       Chua said consumers are often focused on the projected benefits and payouts of a policy and neglect doing more due diligence.

       She advised them to have a candid conversation with their adviser on their financial needs, expectations and future commitments and outline any upcoming expenses, such as a new baby or a home purchase. — The Straits Times/ANN