Cedric Stephens | Strengthening the insurance rights and interests of seniors

Regular readers of this column will know that each week’s content is often the product of many things. This week’s follows that trend.

Personal financial adviser Oran Hall’s excellent advice in last week’s Sunday Gleaner about buying life insurance is one of the things that influences this week’s column. The second is a product advertisement by a leading financial service provider. The third is a full-page Ministry of Health & Wellness COVID-19 advert targeting persons 60 years and older and their loved ones. This newspaper’s feature last Sunday about the doyenne of the island’s elderly citizens, Professor Denise Eldemire-Shearer, is yet another.

As I write, I suddenly realise that the link between these seemingly random influences was, perhaps, subconsciously created by my visits, along with an elderly relative, to four financial institutions over the last few days. I experienced first-hand how some employees of the biggest names in the world of local finance treat their customers. It was not as if customers were at the centre of their universe as they try to make us believe. With one notable exception, the quality of the service delivered was poor.

The penny finally dropped after I read that the Taiwanese insurance regulator had tightened the protection that is afforded to senior citizens in that country who buy insurance. The regulator, whose functions and the abbreviation of its name are identical to those of our Financial Services Commission (FSC), is revising its rules “to strengthen the protection of the insurance rights and interests of senior consumers”. The special-service assistance that local financial institutions deliver to senior citizens and members of other vulnerable groups is often limited to a designated space where they can sit and, perhaps, a sign or two. Nothing else.

What are some of the things that inform the choices of policymakers in our regulatory bodies when they are formulating policies for the industries that they regulate? Are site visits, interviews with consumers, reviews of customer complaints, for example, mandatory? When I read, for the umpteenth time, that our Financial Services Commission’s market conduct guidelines for insurers and intermediaries about the handling of claims, I get a distinct impression that the authors never experienced how an actual claim is handled.

The employees of life and health insurance providers, including those who handle claims, appear to be chosen for their lack of empathy. The process for resolving problems, when customers, their relatives and or dependents feel most vulnerable, based on my experience, is invariably mechanical, cold, and indifferent.

According to Asia Insurance Review, the new rules that are being introduced by the Taiwanese regulator, focus on three areas:

1. Strengthen product suitability (Know Your Product or KYP) from the product design side:

• When doing product research and development, the potential impact of various product features on customers over the age of 65 should be evaluated, including assessing whether the new products are suitable for sale to those customers. In addition, the industry shall attach an explanatory document setting out the type of customers the new products are targeted at and state whether the products are suitable for customers aged over 65.

• Before the new insurance products are ready to be sold, insurance companies shall advise their sales personnel and sales channels whether the products are suitable for sale to seniors.

• After the sale of the insurance products, the industry shall re-examine and evaluate regularly whether the products have adversely affected the rights and interests of seniors, based on interactions and disputes with policyholders.

Local rules assume that all customers comprise one homogenous group.

2. Strengthen Know Your Customer (KYC) measures in solicitation and underwriting:

• Insurance companies shall require their employees to participate in annual training courses on the fair treatment of customers over the age of 65.

• Sales and underwriting personnel should evaluate whether customers over 65 years old can identify situations that are unfavourable to their insured rights, and the insurance company staff should record the evaluation results in the solicitation report. However, if the features of the insurance products have already been assessed to have no unfavourable potential impact on seniors, there is no necessity to carry out the evaluation.

• The process of selling traditional insurance products should be tightened when underwriting business for seniors to ensure suitability. This includes recording or videotaping the process for customers aged over 65 years, representing a change from the previous stipulation for such recording to be done for customers over 70 years.

• For customers aged over 65 who meet the conditions of purchasing insurance products, insurance companies should conduct telephone interviews, video calls, or remote interviews after the sale and before agreeing to underwrite the insurance products. The insurers’ personnel should ask questions, the answers to which would help confirm that the customer understood the insurance products and any unfavourable factors surrounding them.

Know your customer (KYC) rules, to my knowledge, are only applied in Jamaica to the extent that the institution is seeking to comply with anti-money laundering legislation.

3. Strengthen information disclosure for investment-related insurance:

• The industry shall provide insurance proposals to customers who wish to purchase investment-type insurance products, and the proposals shall disclose the computed value of the insurance policy for each year of the policy.

• Insurance companies shall provide user-friendly access to customers who are over 65 years old or those with disabilities to help them read sales documents related to investment-type insurance products.

Based on feedback that I have received from scores of local insurance buyers over the years, and more recently, over the last 12 months, investment-related life insurance products are bad words. Persons approaching retirement or who are now in their retirement are finding out that the nest egg to which they were contributing over decades ago has all but disappeared. This is the life insurance industry’s nasty little secret, and in my opinion, is an example of regulatory failure.

According to the Planning Institute of Jamaica, elderly people in Jamaica make up nine per cent of the population, and that total is expected to grow to 17 per cent by 2030. The bank and non-bank regulators, the Bank of Jamaica and the FSC, respectively, should be at the forefront of introducing measures to ensure the protection of the country’s senior citizens who are consumers of banking, insurance, and other financial service products as the nation approaches its 60th anniversary.

- Cedric E. Stephens provides independent information and advice on the management of risks and insurance. If you need free information or counsel to help you solve a problem, write to The Business Editor at business@gleanerjm.com or contact Mr. Stephens directly at aegis@flowja.com. Letters and e-mails will be edited for clarity and length.