What are the ethical issues behind the insurance industries? Are projected returns of insurance policies realistic?
Ethical issues embedded in the insurance industries are my potential research project topic. You may have come across the news regarding the recent bonus reduction carried by NTUC Income (Singapore’s largest life insurance company). Existing policyholders are given no choice but to accept the reduced allocation of bonus to their policies. It begs one to think about the fairness of such a corporate practice. That recent article triggered my interests towards the ethical issues of the insurance industries. Basically to narrow down the scope of my research, my approach would be to compare between 2 insurance products:
1) Life insurances – one of the most commonly sold products by insurance agents
2) Term insurances – an uncommon product
From the comparison of products, various ethical issues regarding selling, unrealistic projected returns, and unfair business practices within the insurance industry will be deeply explored.
The target audience for this research project will be the NUS undergraduates who are potential insurance buyers as they are about to enter the work force and will have purchasing power. Since buying life insurance is a long term investment, potential insurance buyers such as the NUS students should learn some basic insurance knowledge and hence equip themselves against rogue insurance agents.
Insurance agents like to sell endowment and whole life policies, including variations of these policies, to consumers as a way to plan for their future. This is simply because life insurance provides one of the highest commissions to the agents. Hence, life insurance is one of the most highly marketed products. These policies offer poor value to the consumer.
High costs of life insurance policy
a) Upfront marketing cost = 1%
b) Expense ratio and mortality = 1.5%
c) Guarantee penalty = 2%
Total = 4.5%
Potential surveys would be conducted on 2 distinct populations - current insurance policyholders and the insurance agents from various companies. From the policyholders, we would like to learn about their experiences with insurance companies. From the insurance agents, we would like to get their opinion on whether the life insurance policy offers a fair return to the policyholder.
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4 comments:
Hi Victor,
From my opinion, this topic is difficult to research on. Because to carry out the online survey, you have to assume that undergraduates already have some knowledge about insurance in Singapore. However, I feel that few students would understand insurance as well as you do. At least the international students would not understand the situation in Singapore that well.
Conducting online survey (such as using surveymonkey.com) would not allow you to explain those terminology associated with insurance (such as expense ratio and mortality). Therefore, if students don't understand your question, they would not do the survey. In the end, it will be a very restricted group of students who are able to complete the survey for you.
But being able to do the survey does not mean that they will do if the topic is not interesting to them. From what I see, it's true that NUS students are potential buyers, but at this point of time, insurance may not be that important to them. You seldom hear NUS students talking about insurance in school, as this topic is not affecting their life as yet.
Hence, I think it will be very difficult to gather enough feedback for this topic.
Lastly, who will be your report for? What changes do you hope to see?
The project concept is a novel and interesting idea.
However, I agree with Teresa on the perceived difficulty of getting reliable survey results if the target population is undergraduates as the technical terms need to be explained adequately for proper understanding. Surveying current insurance policy holders and insurance agents are appropriate alternatives but considerable effort need to be spent on sourcing for these two groups of people.
The gathered data on peoples' opinion of the ethical issues and fairness behind insurance policies may be applied to propose a change to the insurance companies such that there is greater transparancy and justice to the customers. However, this may be not be too feasible in reality. Private corporations have their own set of management guidelines and the project focuses more on the benefit of consumers rather than that of insurance companies. Profit-driven organisations are highly unlikely to implement any change that do not consider their profit and loss. To tackle this problem, the project needs further research especially on the needs of insurance companies to devise a win-win plan for both consumers and sellers.
I agree that insurance which is an enormous business needs investigation. I know that you didn't research this in the end but you raised some good questions nonetheless. In fact I hadn't seen the article you mmentioned about NTUC but you seem to suggest that they changed policy conditions of their clients mid-term which can't be right as that would be mid-contract. I would have thought that legally, the client would have to agree to this and accept something in consideration of this concession (agreement). Is this a business you would like to enter after graduation?
Teacher-Fiona
Hi Ms Fiona,
You have asked a good question regarding adjusting the term of an insurance contract. Most contracts have terms which are clearly favorable to the insurance companies. I will not go into details.
To summary, contract terms which are important to the clients are not clearly stated in the contract. Hence, there is a leeway for insurance companies to adjust their clients' policies legally even during mid-contract.
Regarding my future career, I am not that sure if insurance business fits my interests. But I do read up about some of the insurance practices in Singapore to improve my general knowledge.
Thank for your comments. Hope my reply answers your query.
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