Is it recommended to buy insurance policies such as medishield from agents from FA firms like Finexis?
It is a common misconception that Finexis is an IFA. In fact,
there are few true blue IFAs in Singapore. Non-independent FAs may carry multiple insurers’ products but can cut deals with them to promote a company’s products over another. Some non-independent FAs are even outright owned by insurance companies.
Since they don't solely sell insurance and they don't have the responsibility to ensure a good service name for the insurance company they've recommended to their clients (because technically they don't work for these insurance companies), would it usually be very problematic when trying to make claims through these agents?
I'm worried that they wouldn't make sufficient efforts when it comes to making claims. Is it even recommended to get insurance from such agents?
A responsible person, be it a tied agent or independent adviser, will do their best to help you make a claim. However, no tied agent or adviser can possibly guarantee you that they will be still in the business years down the road when you make a claim. You might even outlive your agent.
However, claims are usually pretty straight forward. For instance, hospitalisation claims tend to be done automatically between the hospital and the insurer. Other kinds of claims are also just a matter of submitting the appropriate paperwork which the insurer’s customer service will be more than happy to advise you on.
In fact, I believe that it is more difficult to rely on a tied agent to help you with a claim.
Point 1: According to tied agency contracts, you are not their client; you are the company’s client. When a tied agent leaves for another company, he is usually contractually not allowed to have any professional dealings with you (usually for a couple of years). In my experience, the tied agent isn’t able to decide who takes over as servicing agent. I’ve had strange people take over my clients portfolios who really just wanted to sell them more policies.
Independent advisers, on the other hand, typically “own” the relationship (some FAs are like tied agencies on this though) between his clients and himself — that is to say, if he leaves for one company to another, he can bring his clients with him and provide continuing service to them. If he leaves the industry altogether, he is more likely to be able to pick the next servicing adviser whom he trusts.
Point 2: A tied agent is contractually “tied” to his insurance company while an independent adviser is not. An insurance company has a lot of power over their tied agents. Contractually, the agent has to be aligned with the company’s interests. What happens when the client, ie. the one making a claim, has a conflict of interests against the insurance company, ie. the insurance company, for some reason, does not pay a claim? The tied agent can only do so much considering his recurring income and entire client base lies with his principal company, and he would be smart not to cross the line since he is contractually bound to the insurance company. There is a reason why they are called “
tied agents” or even
“captive agents” in some countries.
An independent adviser has no such allegiance to any insurer (unless of course he is not independent to begin with). In fact, if I have clients who have issues claiming with Insurer A, you can be sure that I’d not put any further business with them. And indeed that’s how it’s practised within my immediate colleagues where we share our claims experience and avoid putting business with a very small minority of them in which we have had less than positive experiences.
What’s a tied agent going to do if his company falls short? Leave the company? Again, there's a reason why the word
captive is used in some places to describe tied agents, and I’m speaking from experience.
PS: I was a tied agent for slightly more than a year and have been an independent adviser ever since for almost 4 years.
