Tuesday, October 28, 2008

The need for Professional Indemnity Insurance

In our industry, we can get into arguments with our clients especially when money is involved. Just like to quote 2 examples I encountered this year.

1) Client purchased a Personal Accident Plan. He claimed that he was injured and insisted to go for a health screening and CT scan to make sure he is okay. He was not hospitalised. The bill chalked up to about $1.5k after the CT Scan he did in a private hospital. He managed to claim full from his company and tried to claim the same amount from his accident plan. I told him that he cannot claim both to make a profit. He was very angry and alleged me that I did not inform him that he cannot claim from both insurer and company. He insisted that he should be paid because I did not inform him on it.

2) Client purchased an Shield Plan and plan commenced on 1st Feb. He was admitted on 27th Jan and incurred a bill of $60k. I told him that plan commenced before 1st Feb and not claimable. He insisted that I did not explained properly on the commencement date and I was investigated by the insurance company. He insisted that the company should pay the bill from 1st Feb onwards even though the admission is on 27th Jan.

Anyway, my conscience is clear on both cases but I'm not sure what will the outcome be if these 2 clients decided to take me to court. What I want to highlight is the vulnerability of an FA. It is likely a case of our words against their words. They may have forgotten of what we said, our last meeting can be 1 or 2 years ago. Its not possible to document every single thing we discussed. Clients can easily turn against us if they are not happy with us.

I am following closely on the Minibonds issue and interested to see if the banks are willing to refund their customers on these monies. I was thinking what if they agree to pay, must the FA who sold the minibonds need to pay their clients too? The RMs who sold millions of minibonds are protected by the banks. An FA who only sell 1 minibond is enough to make him a bankcrupt.

If an insurance company come out with one product and later found that its not suitable for ordinary folks. I'm believe their agents will be more protected than an FA. An FA who did his job properly his whole life but unlucky enough to meet one client who have enough financial capacity to find the best lawyer to prove that he did not do his job. I think the client can win easily.

I sort of get quite worried after seeing this minibond issue. I dare to say that 100% of these investors will now say that their advisers mis-sell and mis-represent. They cannot remember anything else except that they had lost their money. They will find bones from eggs to prove the adviser is wrong.

I'm lucky not to be involved in this but I'm sure I will go get my own "Professional Indemnity Insurance" soon. The one provided by my company is definitely insufficient.

4 comments:

SGDividends said...

Hi,

I know FAs have a hard time and you guys do provide a benefit to society...contrary to what most people think. Anyway, its good that you are open and frank and u started this blog.

This post made me think..
if you have 2 insurance plans covering the same thing, in the event of an accident, we can only claim from 1? Not 2? Then is there a value in buying 2 similar insurances?

Anonymous said...

Let the flaming start...

Derek said...

Hi SGDividends,

As Adrian has mentioned, you can never profit from insurance except for critical illness and life plans. Hence there is no point in buying 2 accident plans but most company already have their own basic insurance coverage for their own employees. The only downside is that when you leave the company, your insurance will be void.

Anonymous said...

Adrain, you day has begun and next year will be your year when the field is leveled for you wihtout double standards. The bad news is, it will be more stringent and I can see hundred, if not thousands, of agents and FAs being chopped off every year too. This is good news too because agents like your old colleagues will face chopping more severely than others.These are the people who are the cause of things like the MINIbombs. Look up, Adrain...but don't step on the dead bodies there will be lying all over. Still be ethical and honest.