In what could be a breakthrough for the insurance industry, the Competition Commission of Singapore (“CCS”) announced two days ago that they have fined ten financial advisers for anti-competition behaviour.
For those of you (like us) who have good memories, you may recall iFast Financial Pte.Ltd. (iFast) launching its promotion of a 50% commission rebate on life insurance products on the Fundsupermart.com website three years ago.
Not surprisingly, the promotion kicked off on a big bang with consumers quickly recognising that they could enjoy significant cash savings by getting their life insurance policies online, instead of going through the typical way of an agent.
Back then, we thought this would be a great move to increase the overall standard of the industry by allowing people to compare and buy their insurance policies online, we were not wrong. Neither were we alone in thinking that, as some financial adviser firms shared the same sentiments, only that they were concern that their profit margin would erode.
Three days later, without any prior announcement or reason, the offer was withdrawn. Speculation at the point in time was that the insurance advisers that iFast worked with were unhappy with the promotion.
Three years later, it appears that these speculations were right.
What Went Down In Those Three Days?
What happened was that a group of financial advisers ganged up together to pressure iFast into withdrawing its Fundsupermart offer. These firms were found to have been concerned that the offer would prompt both existing and potential customers to switch to the iFast platform to enjoy better discount, bypassing the traditional method of seeking out an insurance agent to purchase a life insurance policy.
Due to the commercial partnership that these firms had with iFast in its unit trust business, the firms were able to successfully pressure iFast into withdrawing its offer.
Buying Insurance Online – The Future Of The Industry
If buying an insurance policy online at a cheaper price sounds familiar, it is because these types of platforms are no longer new. Since the time of 2013, we can think of at least 2 platforms that offer consumers lower priced policies via online transactions. These platforms are able to do so because they cut out the middle person – the agents.
For example, DIYInsurance allows its customers a 30% commission rebate on insurance policies purchased through its platform (sounds familiar?). The company that runs it, Providend, is a fee-based agency works closely with most insurance companies in Singapore.
On the government front, CompareFirst.sg was also launched jointly last year by CASE and MAS to provide a platform where consumers can buy insurances directly from companies, without the need for an agent.
Of course, bypassing agents also mean that consumers would need to better understand for themselves what it is that they are buying, rather than to continue staying uninformed. They will need to have basic understanding of how insurance works. On the flip side, it also means that agents who want to continue growing their business will need to differentiate themselves from these platforms by providing genuine advice that their clients appreciate, rather than to be salespeople trying to push through high margin products.
The Inevitable Evolvement That We All Need
The CCS are not experts in the insurance industry. Yet, they recognise that the actions of the 10 financial advisers had prevented a competitor from providing a lower-cost offer to consumers. An offer that was considered “innovative” and would have helped saved on distribution cost and increase savings to consumers. The fine issued out to the 10 advisers ranged from $5,000 to $405,114, amounting to a total of $909,302. The firms can appeal against the fine.
The fine may have paled in comparison to what consumers could have saved had the offer continued and became the new norm. At the very least however, it sends a strong signal today to financial advisers and insurance companies that any behaviour to curb competition and innovation in the industry would not be tolerated.
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