May 2021
In the second half of 2020, a trend was noted in the number of licensed individual insurance agents promoting insurance products in public places from temporary booths or from recently vacated street-level retail outlets. Comments received through our complaints and other channels on this activity, prompt us to remind licensed individual insurance agents and their appointing insurers to be vigilant with regards to the following issues:
Use only pre-approved marketing materials
The use of “self-made” marketing materials and banners (e.g. banners/materials created by the individual agents themselves without being approved by their appointing principal) was observed in certain booths or retail outlets which were brought to our attention. Often these self-made materials were positioned prominently outside the booth/shop to catch the eye of passers-by, or were in the form of flyers handed out to pedestrians, and they generally does not bear the company logo of the appointing principal. The materials tended to make bold, high-level comparisons regarding the returns offered under the insurance product being promoted as compared with other “investments” (such the I-Bond, bank deposit, car-parking spaces, or even the property market). Clearly designed to “hook” the attention, in isolation the contents of these materials could potentially be misleading and (on enquiry) many of these materials had not been approved by the insurance agent’s appointing insurer. In accordance with Standard and Practice 1.1(c) of the Code of Conduct for Licensed Insurance Agents, a licensed insurance agent is required only to use materials supplied or approved by its appointing insurer or appointing agency, when advertising, marketing or promoting an insurance product. A non-compliance with this requirement could result in the insurance agent being guilty of misconduct.
The vital need for professionalism….not pushiness
There is a big difference between politely catching the eye of a pedestrian and engaging them in conversation on insurance, and standing in a pedestrian’s way and blocking their path until he or she has heard what you have to say. The latter kind of pushy sales tactics will often result in a complaint to the regulator and the insurance agent in question being investigated for misconduct. Pushy sales behaviour is unethical and erodes the insurance industry’s image for trust. Don’t do it! It is also important that licensed individual insurance agents be open about what they are promoting from the outset. Offering the gift of a free face-mask and pretending that you are only there to do a survey (which is not related to insurance) to get the customer’s attention, and then when the customer’s attention is “hooked” in this manner, switching to promote insurance, can hardly be called “treating the customer fairly”. Avoid these kind of questionable practices. Be professional and ethical at all times.
The need for the prospective customer to make an informed decision
Always be aware that sale activities from booths or makeshift retail outlets are not conducive to offering the discussion time needed for prospective policyholders to understand the insurance product on offer and make an informed decision about the purchase. The customer should always be given the opportunity to make an informed decision - that is the golden rule. In accordance with Standards and Practices 2.2(b) and 5.2(a) of the Code of Conduct for Licensed Insurance Agents, when giving advice to a client, an insurance agent should provide the customer with adequate information in order to assist the him or her to make an informed decision and should provide all relevant information on the key features of each insurance product (e.g. major policy terms & conditions, exclusions, level of premium, fees and charges etc.) being recommended. If the customer needs more time to consider, let them have that time. Make another appointment if needed. Don’t ever push a customer into buying a product they neither want nor need.
Marketing at short-term roadshow or makeshift booth can increase the reach of insurance intermediaries (and insurance) to members of the public. However, if such activities are not properly managed, they could lead to heightened market conduct risks. To mitigate the risks, appointing principals are expected to put in place sufficient controls to ensure that all regulated activities are properly and ethically carried on by their insurance agents. Here are some good practices adopted by the appointing principals in the market:
Provide compliance guidance and training to individual insurance agents before authorizing them to embark on these marketing activities, with clear “do’s and don’ts” promote customer fair treatment;
Make clear that only materials provided by or approved by the appointing principal may be used;
Require prior notification to be given and approval to be obtained from agents before they embark on such marketing activities (particularly in relation to self-initiated activities);
Maintain a register containing information on each booth or outlet or other platform at a public place utilized by your appointed insurance agents for monitoring and record-keeping purposes;
Conduct regular site visits or even mystery shopping to ensure that the marketing activities are conducted in line with the internal standards and policies and in line with the principle of treating customers fairly.
When conducted professionally and ethically and when the customer’s interest is put first, these streetlevel sales can be an effective way of making potential customers aware of the importance of insurance. However, the Market Conduct Division at the IA is alive to the issues cited in this article and, on occasion, when passing by a booth or retail outlet may allow themselves to be drawn into discussion with the insurance agent…..just to make sure the policyholder experience is as it should be!