The Insurance Agent, Their Ethics, Life Insurance Scams & Moral Hazard

Before we start to lay the blame on the financial industry, we are not anti-financial advisor or anti-insurance agent. We support with respect the highest ethical standard of financial advisor and insurance agents. The financial services industry offers incredible career opportunities for those who want to make big bucks, especially true for insurance agents and the insurance industry seems to be starving for new hungry agents.

Too much focus on selling as most agents tend to focus too much on the selling rather than providing the solution to the customer. There is a need to identify and sell the problem first before selling the solution.

The Worse the Product, The Higher the Commission

Conflicts of interest, one of the biggest conflicts involves the sale of insurance and investment products. We kept hearing stories from friends, relatives and regular strangers who were convinced into putting their money into money making insurance and investment products. They were told by their advisor “really believes” in the products they choose.

Then, the truth comes out.

In the business of insurance, an agent makes much more money from whole life insurance than term life insurance. Why?

Because the premiums are higher

How high?

The typical insurance commission for a whole life policy ranges between 50% to 110% of the first year’s premium. That can continue into the second year, and it declines thereafter. For instance, purchasing a whole life insurance with a $60,000 annual premium, they can anticipate $30,000 to $66,000 going directly into the insurance agent’s pocket in the first year.

There is a commission to be made. And, many advisors no longer do what is best for their clients.

Your insurance agent sees their job as the road to millions, not as a means to help people. The real difference lies in attitude, having no long-term goals and a plan to help people. Insurance agents are using their job opportunities as a tool to give their family a dream home, travel the world, build a classic car collection. These insurance agents no longer get up in the morning excited and passionate about “helping people”.

If the financial industry was built to benefit the customer, better products would have better commissions instead. The reality is that, the more you focus on the value the product that could bring to the life of the clients, the less important the commission money for the agent becomes.

Unfortunately, that’s not the case. Many products are meant to be sold. Not purchased. Imagine if doctors don’t take a pledge to do what is best for their patients. Then you can imagine exactly what the financial industry world looks like, too.

The agent should establish clients’ requirements and problems and then focus around suggesting an insurance product.

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Any comments to further add to this article are most welcome.

We are simply against bad models that don’t help my readers.

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Email: brunei.wiki@outlook.com