Seth’s Blog on Finance

Do You Trust Banks and Insurers?

There was a Straits Times article over the weekend which reported that the reputations of local banks and insurers are recovering, after suffering a dent in image during the financial crisis. This was the result of a poll surveying 341 people.

Personally, I’m not so sure what kind of image they are talking about.

“Horror” stories of errant relationship managers or unethical insurance agents are not uncommon, but such incidents do not usually have a wide reach. Even fiascoes that do, like the mini-bond saga, will eventually be forgotten over time.

Apart from blatant regulation breaches that get reported in the news, what I feel is not apparent to the general public is the fact that transgressions are being committed on a daily basis and yet are considered legally compliant practices. While everyone knows that financial institutions are of course profit-making entities, I’m not too sure they know what extents supposedly reputable organisations go to in order to bleed them dry. Products are getting increasingly complex with all kinds of unnecessary charges layered in and features added that are more frivolous than beneficial. An insurance policy can now have more than 20 – 30 pages of technical jargon and numbers in its Benefit Illustration, which it claims to be transparent. Sure, it can be very transparent which is meaningless to the layperson who will not be able to decipher the information given to him or her.

I am also not sure how they can be said to have a positive image. When I return home from work, I will walk past people distributing flyers, salon staff trying to sell packages and of course, the ubiquitous bank staff promoting financial products or insurance agent doing a “survey”.

I believe that a healthy sense of sceptism is important, but I guess the market of consumers has now been polarised into mainly two types – those that will readily trust financial institutions just because they are supposedly reputable, and then those who have become utterly cynical about all things finance. Either way, both have a very determined one-way path to financial doom.