Leave a comment and share
Chuks Udo Okonta
Underwriting companies have been urged to clean up the insurance agency system to stem the unethical practices being perpetuated by some of their agents.
A Pension Fund Administrator (PFA) disclosed this in an interview with Inspen, stressing that the unhealthy marketing in the sales of annuity by agents is inimical to the growth of pension benefits business.
He noted that in a bid to get commissions, some agents mis-lead retirees, instead of giving them the option to choose the benefits that suit them.
He said: “The competition is unfair. It is like a boxing match where you tie one man’s hand behind and the other man has two hands. That is exactly the analogy of annuity and programmed withdrawal.
“One hand of pension fund administrators is tied behind their back and the insurance providers have two hands and may be a head to head-kick them. You see that there is a big challenge as far as dealing with benefits side of the business is concerned.
“Let me just explain how this works, the pension fund operators are supposed to offer two options to their subscribers for retirement benefits access, that is the programmed withdrawal and the annuity.”
“The programmed withdrawal is a product of the pension industry. The annuity is a product of the insurance industry, there is a tendency for some operators to lean more on the programmed withdrawal side than the insurance side.”
He noted that pension fund administrators have maintained the position that retirees should be giving the option to make their decisions on the benefits that suit them, in spite that the funds are incubated by them.
“We could not really be bother where a retiree decides to access his benefits, programmed withdrawal or annuity. But having said that, the insurance agents, I said agents, not the companies, the agents have only one motivation and that motivation is commission. So, they can draw blood to earn that commission, so, they spread a lot of information that is not true just to be able to access the retirees’ benefits to the insurance industry,” he said.
He noted that as long as insurers are allowed to intervene in pension benefits business, there is bound to be conflict, adding that the conflict would be hard to tackle.
“The long and short of it is that I do not think there is any reason to fight. Both are trying to serve one customer and we should put in the front of the customer what the benefit of each option is and allow the customer to decide.
“The two critical areas are that the pension industry is where the funds are incubated, so, there is a tendency for them to protect the funds. The insurance people are motivated by commission and they what to take those funds at all cost. I thinks there are ways as gentlemen and women, we can offer products to clients in a more decent way,” he posited.