Strengthen licence requirements for insurance agents

I refer to the letter by Peter C. H. Tam, of the Hong Kong Federation of Insurers ("Give insurers clear 'best interests' rule", July 14).

I agree that the legislature should elaborate on the meaning of "acting in clients' best interests".

However, instead of just grumbling about the vagueness of the phrase, Mr Tam and other industry leaders could help by sharing their views about what it means.

For example, does he think it's good practice for agents to recommend investment-linked assurance schemes (ILAS), when buying term life insurance and directly investing in index funds or unit trusts can guarantee higher returns and lower risk, at a fraction of the cost?

Two million ILAS products have been sold in Hong Kong over the past decade. A significant percentage of the policyholders will probably be forced to delay retirement due to paying decades of unnecessary fees and receiving poor investment returns. Those who must retire due to health problems and still haven't accumulated enough savings to support themselves may have to seek public welfare. This could drive up taxes for the younger generation. Insurers will have profited handsomely, but at the expense of policyholders and taxpayers.

Mr Tam claims that insurers "have served millions of customers by providing them with the necessary insurance coverage". In fact, insurers have exploited millions of consumers by hard-selling them costly and unnecessary savings and investment products that have little or nothing to do with insurance.

There are many wealth management products on the market, but the products offered by the insurance industry are not competitive. It's almost never in anyone's interest to purchase an ILAS product (or whole life insurance, for that matter).

The only reason these products have been distributed so widely is because insurers have incentivised their salespeople with shockingly large commissions. When agents recommend such products, they are generally motivated by self-interest, not a sense of fiduciary duty.

I suspect most agents probably don't even know how badly they've harmed their clients. I recently met one who didn't even know what an index fund was.

Most agents are simply not qualified to know whether or not they are acting in clients' best interests. If the law is going to require them to do so, then the bar for obtaining a licence must be set much higher.

Lindell Lucy, Tai Wai