White Collar | Insurers should always act in clients' best interests
But industry's opposition to requirement to do so in law is perplexing
Lawmakers are debating a government reform plan to introduce a new law to set up the Independent Insurance Authority. Going by the debates, it appears there are no strong objections to establishing the body but there is an interesting discussion over a provision in the new law requiring insurers and their agents to act in the best interest of the policyholders.
This debate is a surprise to many. Common sense assumes all financial professionals, including the insurance sector, should act in the best interests of their clients.
But what has come out after several committee meetings is that some insurance industry representatives told lawmakers they are not comfortable with the new law containing the principle requiring intermediaries "to act honestly, fairly, in the best interests of policyholders/potential policyholders and with integrity".
They argue that the principle may lead customers to initiate lawsuits and say it is vague to define what is "in the best interests" of policyholders.
White Collar does not understand why insurers are so worried about this clause. For the public, if they have spent tens of thousands of dollars to purchase the policies, it is because they trust the insurance company and their agents.
It would be a shame if policyholders placed such trust in the companies and their salespersons while they in turn do not want to follow the principle to act in the best interest of their customers.
There are always opportunities for customers to sue the company or the salesperson but that should happen only when the company is doing something harmful to their clients. For the majority of insurers and agents who are doing a good job, they do not need to worry.