banks should not act like insurance agents/anti-competitive

the following letters highlighted very interesting and pertinent questions and was published in today's straits times forum page:

Jul 25, 2011
Banks should not act like insurance agents

RECENTLY, my husband and I were looking to buy some insurance policies. As we had previous bad experiences buying through insurance agents who were keen on pushing only their own companies' products, we thought of buying through banks instead.

Since most banks are now positioning themselves as one-stop centres offering a suite of financial products, we thought they would be independent. We were wrong.

We visited DBS Bank and it was aggressively pushing only Aviva's products. We tried OCBC Bank and it was pushing Great Eastern's products. We tried United Overseas Bank and Standard Chartered Bank as well and came out ruffled as their insurance consultants were pushing Prudential's products. In other words, we had no choice.

The bank staff told us that the insurance companies they were representing were the best and their products offered the best value. But how would we know if this is true if we cannot make any direct comparisons and decide for ourselves?

Are banks independent if each pushes only one insurance company's products? Or have they become agents of the insurance companies? Are banks driven by customers' needs and interests or by the commissions paid by insurance companies?

Shouldn't the Monetary Authority of Singapore make banks stick to their banking business and stop behaving like insurance agents?

Jessie Loy (Ms)

Jul 25, 2011
Anti-competitive

'Almost all car dealers insist buyers take up motor loans and insurance from companies they have tied up with.'

MR LEONG SZE HIAN: 'I bought a new car recently and was told by the manufacturer's sole agent that I must take up its motor insurance policy with an insurance company. This was despite the fact that I could get a cheaper net motor insurance premium and a lower claims excess from another insurance company. This is clearly anti-competitive behaviour, which I understand is prevalent in the motor industry here. Thus, is it any wonder that motor insurance premiums have been going up in recent years, when consumers are forced to take up more expensive policies with less benefits in the event of a claim? My understanding is that almost all car dealers insist buyers take up motor loans and insurance from companies they have tied up with. What this means is that even if the buyer can obtain a car loan with better terms, he cannot do so.'

my comments:

firstly, going by ms jessie loy's question to the monetary authority of singapore for banks to stick to their 'knitting' or core business, there is no restriction for banks to sell insurance or for that matter, other investments also.

the fact is that the bancassurance channel has enjoyed a surge in their share of new life insurance business in the 1st quarter 0f 2011 with 37% market share, up by 14 percentage points from that achieved in the same period of previous year.

but what is really interesting is mr leong's experience on the purchase of his new car that leaves him with little or no choice in terms of taking up motor loans and insurance from the same car dealer.

would this not beg the question of being anti-competitive?