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How insurers cheat their way out of bad products
17 Jan 2020 (81 views)

Some insurance companies offer investment policies that guaranteed a high rate of return. When the investment return drops, due to economic situations, they suffer a large financial loss. 

This has happened many times during the past decades. Some of the insurers found a way to "cheat" their customers and get out of the loss. 

This is what they do.

They introduce a new product with some attractive features. But these new products did not offer the high attractive return that were embedded in the old products.

The insurers train their agents to approach the old customers and convince the customers to switch from the old products to the new products. 

The customers were not aware that their old products had offered a better return. They trusted the advice of the agents and switched to the new product. A large proportion of customers make the switch. The insurer got away from their financial problem.

The agents were happy to facilitate this switching. They earn full commission on the new products that were sold. 

What happened if the investment return had gone the other way, and the investments earned more than the guaranteed return? The insurer pockets the difference and shows big profits. 

It is like throwing a coin - head, they win, tail, they do not lose.

It is unethical and immoral. But it has happened many times in the past. It will happen in the future, as consumers are not aware and financially illiterate.

Tan Kin Lian


How insurers cheat their way out of bad products
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Some insurance companies offer investment policies that guaranteed a high rate of return. When the investment return drops, due to economic situations, they suffer a large financial loss. 

This has happened many times during the past decades. Some of the insurers found a way to "cheat" their customers and get out of the loss. 

This is what they do.

They introduce a new product with some attractive features. But these new products did not offer the high attractive return that were embedded in the old products.

The insurers train their agents to approach the old customers and convince the customers to switch from the old products to the new products. 

The customers were not aware that their old products had offered a better return. They trusted the advice of the agents and switched to the new product. A large proportion of customers make the switch. The insurer got away from their financial problem.

The agents were happy to facilitate this switching. They earn full commission on the new products that were sold. 

What happened if the investment return had gone the other way, and the investments earned more than the guaranteed return? The insurer pockets the difference and shows big profits. 

It is like throwing a coin - head, they win, tail, they do not lose.

It is unethical and immoral. But it has happened many times in the past. It will happen in the future, as consumers are not aware and financially illiterate.

Tan Kin Lian