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Old 30-07-2010, 03:36 AM  
Rommie2k6
Senior Member
 
Join Date: Sep 2005
Posts: 2,392
Hahaha... I'm a bit late but came across last week's Straits Times article on how Finexis is involved in the "volume bonus" thingy. No surprise, in my original thread, I already cautioned everyone to avoid Finexis and finally it seems that there is proof that they are a really bad IFA company.



Insurer fumes over policy’s high lapse rate
Straits Times Singapore, 24 Jul, 2010, Saturday
After taking ‘free’ first-year cover, many AXA customers dropped out
By Lorna Tan, Senior Correspondent


INSURER AXA Life is seeing red after one of its distributors offered free insurance cover for the first year as a gimmick to attract customers.
With no premiums to pay for a year, many signed up. The problem is that customers did not renew the policies once the first free year ended.
But in the meantime AXA paid the distributor, financial advice firm Finexis, millions of dollars in sales commissions and bonuses for marketing the product.
Now, AXA is trying to claw back more than $7 million of this money, according to market sources.
Amid the dispute, AXA’s Singapore chief executive Gilbert Pak resigned with immediate effect on Thursday. He had been at the insurer since October 2008. According to AXA, Mr Pak cited personal reasons for his departure.
The product sold, FutureProtector, is a term insurance plan that provides cover in the event of death or total and permanent disability for a set period ranging from five to more than 15 years.
In a bid to boost sales, Finexis, which has about 500 advisers, last year effectively gave away the product for free by marketing it at steep discounts of up to 100 per cent off first-year premiums.
Sources say the discounts have dropped to 50 per cent since April.
Despite the huge discounts, the transactions were still profitable to Finexis, as the substantial sales attracted millions of dollars in commissions and volume bonuses from AXA.
However, the plan backfired when the aggressive selling led to a high lapse rate once the first year was up.
Industry players are concerned over whether proper ‘needs-based selling’ was carried out to ensure that such products matched customers’ financial needs.
Life Insurance Association (LIA) president Tan Hak Leh said while there is no specific regulation on commissions and discounts, the LIA does not condone the use of these kind of rebates as an inducement or basis for a purchase.
Both LIA and the Monetary Authority of Singapore (MAS) said that advisers are required to have a reasonable basis for making investment product recommendations to customers.
‘They should not unduly influence the financial decisions of customers by offering rebates,’ said an MAS spokesman.
It is believed AXA’s previous deal with Finexis for the FutureProtector included a first-year commission of 117 per cent to advisers plus another level of commissions called volume bonus to the firm for satisfying sales quotas.
This means that even if FutureProtector was given free for the first year to customers, Finexis and its advisers could still earn some commission. One market observer said the first-year commission that can be earned from selling this product is now 93.6 per cent.
Sources say AXA is unhappy with the high policy lapse rate and is demanding that Finexis return the sales commissions plus volume bonuses.
When contacted, AXA said it does not disclose details of its commercial terms and business arrangements. It said an appropriate level of term insurance protection is the foundation of comprehensive financial plans, and wants to ensure customers’ needs are fully met.
However, Mr Patrick Lim, associate director at financial advice firm PromiseLand Independent said the FutureProtector is not even on its recommended product list, as the rates are not competitive when compared to similar products.
For instance, Mr Lim said, for a sum assured of $500,000, the annual premium imposed by FutureProtector for a male, non-smoker, aged 30, is $730. Rival insurers such as Aviva and TM Asia Life charge lower premiums of $470 and $515 respectively for similar cover. He said his firm does not give discounts.
MAS said it expects advisers to ensure that their investment product recommendations are needs-based and that they meet MAS’ guidelines on fair dealing.
It has also issued guidelines requiring financial advice firms to put in place systems and processes to monitor and deter improper switching activities. It will not hesitate to take appropriate regulatory action against financial institutions which contravene its requirements.
Mr Tan added that LIA members are committed to probe any policy lapse that could adversely affect policyholders’ interests, and to take appropriate action.
When policyholders ask to terminate a policy, LIA members are required to warn them of the disadvantages of doing so.




I wonder how many customers have been misold the AXA FutureProtector... but luckily I don't think consumers were hurt bad since it was a no-premium product (wah... I think first time the consumer don't kenna but the company get into trouble!). This incident just goes to show that being an IFA does not instantly mean being trustworthy, and even the "independent" part of the IFA does have its degree of "tied-ness" for some IFA firms like Finexis. I wonder if their MDRT figures will drop this year?

Footnote: MDRT = Insurance agent who earns **** load of commission for the year.

Last edited by Rommie2k6; 30-07-2010 at 03:40 AM..
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