Malpractice: “Insurance (Investments) Is Not Bought But Sold”?
The proverbial salesperson is defined as one who is able to sell coal to Newcastle or ice to the Eskimos.
Definitely distributors play an important role to bridge the gap between product manufacturers and consumers.
And the gift of the gap is said to be all-important.
But what happens when there are vast gaps between truth and reality in what the salesperson claims?
What happens when there are vital information which is not disclosed to the consumers?
Can we hold salespeople to the standard upheld in court of witnesses to tell the truth, the whole truth and nothing but the truth?
In other words, can we expect honesty and integrity?
I like to examine a few famous sales sayings which have gained mantra status but which may not pass muster in any court.
There are several famous sayings in sales and business which on the surface look good but on closer scrutiny qualify more as malpractice.
For example, “Insurance is not brought but sold”.
This can mean that prospects do not seek to buy insurance on their own and the salesperson must do his best to sell the product. Nothing wrong with this.
But it can also mean that the salesperson will have to present the benefits of insurance in such a way that moves the prospect to act.
It is this motivation to make a sale which often leads a salesperson to emphasize the good points and play down the bad points and in the process often misinform and under inform, and can lead to misselling.
When I was a Supplies and Purchasing Manager of firstly a large public-listed company and also a large multi-national company, my job was to buy what my firm needed. It was of paramount importance that I went through all the merits and demerits of each product and each supplier and satisfied myself that our company only purchased the “best”. For smaller purchases, quotations were called. For bigger purchases, tenders were called to ensure that there was a clean competition.
The buying process was a rational and systematic process which could stand scrutiny by superiors and internal audit.
Shouldn’t insurance and investment decisions be rational, and systematic analysis and comparison of alternatives available?
The rational answer is YES, but not many people actually do it. WHY? Because insurance sales people and many advisers and bank relationship managers have been trained to discourage a rational buying attitude and instead, encourage buying on trust, friendship and sometimes obligation.
Trust is important, but trust can also be misplaced and when it comes to monetary transactions, it pays to exercise prudence.
The reason for discouraging prospects from being analytical and rational is simple – the more the prospect uses his mind, the slimmer the chance the salesperson has to make the sale, especially when there are choices. So there is a training course on overcoming objections whereby the salespeople are trained on how to deftly bring the client back to the sales track. Salespeople are trained to take control of the sales process and to get prospects to agree and to “massage” prospects so that there will be a response to buy if possible on the spot.
Recently, I experienced a classic case of a sales presentation done by a holiday club which presented all the benefits of joining the club and offered a hefty special discount which only applied if I decided on the spot. For obvious reasons, I turned down the offer.
It is obvious that the less “competitive” the product and the product provider, the more important “selling skills” become and a large part of this is to make the buyers buy on factors which have nothing or little to do with the products. One large insurer prides itself in having the best sales force because it could have a large market share in spite of less than competitive products.
I am not against appealing to the emotions when it is ethical to do so, but there is obviously a danger that prospects are led to buy based on reasons which they would regret. Thus the use of the term “buyer remorse” which can only mean that after a good night’s rest or checking with a spouse or a friend, the person realizes he has been had.
Thankfully there is the “free look provision” in insurance and investment sales which allows a person to cancel his purchase without any penalty.
One reason why many people do not put on their thinking cap when it comes to buying insurance and investments is that they are not familiar with the subject and don’t want to display their ignorance. And some salespeople capitalize on this.
Although insurance and investment are not that complex and technical, they are not simple either.
The Lehman Brothers episode drives home the point that we should not buy anything we don’t understand and a good salesperson should be able to explain things in a simple manner. A buyer has every right to ask a salesperson to explain all relevant matters to his satisfaction before he commits himself. If the amount of money is small and the buyer feels bad about using the salesperson’s time, he can see him in the office.
While it takes time to check up facts, and the pros and cons of different products, the good news is that seeing an independent Financial Adviser can save you much time.
Although no IFA in Singapore has access to all the insurance companies, some come close and can distribute for the majority.
Thus always ask for the list of companies which each IFA can “represent”.
So far, insurance may be more sold than bought. The next time however, make sure you put on your buyer’s cap.