GE Life agents to return commissions

GE Life agents to return commissions
SINGAPORE, Aug 4 — About 1,000 Great Eastern Life agents have been asked to return up to S$12.6 million (RM30.1 million) in commissions received from policies they sold up to four years ago.

The GreatLink Choice (GLC) policies are investments the insurer decided last Friday to buy back at full cost.

About 18,000 policyholders invested a total of S$594 million in the policies, buying from the insurer’s network of agents.

Agents earned a 2.12 per cent commission on sales. On average, they earned about S$12,600 each, though some earned close to S$100,000. Now, they will have to give back the money.

This is believed to be the first time that sellers of financial products are being asked to return commissions on products they sold years ago, without admitting to any wrongdoing.

So far, insurers have clawed back commissions only from agents found to have improperly sold policies to customers.

Consumer advocates welcomed Great Eastern’s move, saying it could prove pivotal for the industry.

“In broader terms, this could be a turning point to tie commission payment to performance of the investment that agents introduced to investors,” said Consumers Association of Singapore (Case) executive director Seah Seng Choon.

If this became a trend, he added, it would augur well for the industry as agents would have a stake in ensuring that investors get prudent advice.

On Friday, Great Eastern announced that it would return the premiums in full to all GLC customers, minus the annual payouts they had already received.

Like Lehman Minibonds, GLC was an insurance policy linked to a class of complex financial instruments called collateralised debt obligations (CDOs).

The value of CDOs has been badly hit by diving financial markets, and the value of various GLC plans have plummeted between 40 per cent and 80 per cent. So Great Eastern decided to make a full refund, calling it a gesture of goodwill.

Great Eastern said GLC products were sold by fewer than half of its agency force of 2,500, and went out in five tranches between 2005 and 2007.

Affected customers have up to Aug 28 to opt to get their money back.

Explaining its decision to recover all commissions, Great Eastern said it is offering to treat the GLC policies as if they had been cancelled from inception.

“It is therefore necessary to recover all the costs relating to these policies, including commissions paid to the life planners,” said its managing director (Singapore), Tan Hak Leh.

With the average agent needing to fork out more than S$10,000 in returned commissions, Great Eastern is putting in place an instalment plan to help agents with cashflow problems.

‘We will ensure that none of our life planners will face any financial difficulties,’ Tan said.

Despite having to stump up cash at short notice, Great Eastern agents The Straits Times spoke to were choosing to look at the issue long-term.

Said an agency director who may have to return about S$85,000 in commissions: “In a situation like this, every stakeholder stands to lose something. I can’t expect to win and still pocket my commissions.

“Besides, I depend on repeat customers and their referrals, so confidence and trust are important.”

Agents also noted that policyholders who redeem their GLC policies may re-invest in new products, so there was some potential to recoup the lost commissions.

Case’s Seah said that Great Eastern’s action will help to salvage the confidence of investors not only in the company, but also in its agents in the long run.

He hoped this would set a new precedent for other distributors of financial products. — The Straits Times