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BY NEIL HONEYMAN
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Tuesday, October 24, 2017
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AN ADVERTISEMENT appeared in Business World on Oct 16, 2017. Prepared by Philam Asset Management Inc. (PAMI), it had the arresting title: “Why Finance is the Least Trusted Industry.” Addressing the negative is an interesting departure from typical advertisements.
The finance industry can be divided into two categories according to whether a financial institution comes under the aegis of Bangko Sentral ng Pilipinas (BSP), or the Insurance Commission (IC). My experience is that the level of trust that can be placed in BSP-mentored financial institutions is higher than those under the IC umbrella.
We see with depressing frequency newspaper announcements from the IC giving instructions as to what clients (victims) have to do in order to obtain even a partial refund from IC-supervised companies which are unable to meet their contractual obligations. The absence of effective consumer protection is regrettable, unnecessary, and, unconstitutional.
The BancAssurance concept has had mixed results. Insurance companies place representatives in banks so as to gain contacts and hence business from bank customers. In practice, results have varied. Banco de Oro Unibank Inc. (BDO) has hosted insurance companies. Firstly, it had a BancAssurance relationship with PhilamLife, but found that it was suffering from alleged misconduct from the insurance company’s representatives. As a result, BDO brought in Generali, thereby pushing out PhilamLife. Now the Generali relationship is no more and BDO offers insurance products under its own name.
This is an important development. It means that there is now no financial instrument offered by the insurance segment that is not also offered by the banking sector.
Consumer protection from the relevant government instrumentalities becomes an issue. I find that the financial consumer affairs group of BSP operates with fairness and, where necessary, tenacity. In contrast, the IC has been ineffective in addressing demonstrable misconduct on the part of an errant insurance company.
As an investor, I am prepared to take risk depending on the financial instrument I purchase. I am not, however, prepared to take risk on the improbity of the financial institution with which I deal.
Therefore, I avoid all insurance companies because there is no effective consumer protection./PN
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