These case studies have been modified so as not to identify any actual cases at FIDReC. They are provided for purposes of learning and are not necessarily indicative of outcomes at FIDReC.
Mary was an administrative assistant who would be retiring from her job in a few years. One afternoon, Mary went shopping at a mall when she was approached by a financial advisor, John, during a roadshow. John told Mary that she could convert her local bank savings account to a “saving policy” that could earn her interest at 3%. Attracted, Mary sat down to listen to more. She heard John say that she could draw or save yearly for a maximum of 15 years. She filled up a financial needs analysis with John’s assistance and agreed to purchase the product with a view to save for her old age.
However, when Mary chatted with her financial advisor friend some months later about this policy, she was shocked to discover that the policy was an insurance plan and that she would have to pay monthly premiums of $1,000. She worried that she would not be able to finance the premiums after she retired. She approached the relevant financial institution to ask if she could be refunded the amounts she had paid. After a few unfruitful discussions, she was referred to FIDReC.
Mary went through mediation at FIDReC. The financial institution felt that there was no wrongdoing on the part of its financial advisor based on its interviews with the advisor, and the documents that Mary had signed. However, the financial institution acknowledged Mary’s plight and eventually worked with the insurer to reduce the sum assured so that the monthly premiums were reduced to $180 a month, a sum that Mary was comfortable paying. Mary and the financial institution entered into a written settlement agreement and the case was concluded.
Key Learning Points
• There are many different types of insurance products, from traditional life policies to investment-linked ones. If you have questions, ask the officer. Life insurance products, whether bought through a bank or other financial advisory institution, have the same characteristics as those bought from an insurance company. The early termination of an insurance product may result in losses on the principal sum invested in the policy. There may even be zero surrender value if you terminate the policy within the first two years.
• Before agreeing to purchase a product, ask yourself questions such as what are your financial goals, protection needs, the amounts you can afford, risk appetite, etc. Answer all the questions posed to you in a financial needs analysis properly.
• Before you sign on any document to buy a financial product, you should read and understand their terms. For instance, projected returns are often for illustration only and are not guaranteed. Ask the officer if you are unsure.
• Ensure that you have contingency plans for your daily and other expected expenses before you commit yourself to an investment (including some types of insurance). Buying insurance can be a long-term commitment.
• Some insurance products come with a cooling-off period for consumers to reconsider their purchase, such as a 14-day free-look period. If you change your mind within that time, you should quickly inform the company.
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