Almost everyone who works as an employee is insured under the company’s group insurance. Many companies provide this as a staff benefit. But I see many ethical, regulatory and practical issues with group insurance such as:

1. Employees are merely the life assured. Usually they don’t pay anything to get insured. However, sometimes they would “top-up” slightly more to get their dependents insured with group insurance. Under this circumstance, who is the financial adviser to advice the staff on suitability? Should it be the Human Resource’s responsibility? Or should it be the insurance broker? I worked as an employee for more than 10 years before I become a professional financial planner and from what I observed, nobody takes responsibility with regard to suitability.

2. Many employees depend on group insurance to provide themselves with cover. Although they don’t pay for it and as such they are not policyholders, nevertheless they rely on such group insurance to protect themselves and families. In this case, who is responsible to advice such a staff? From what I know, nobody takes such responsibility.

3. How about those group insurance offered by SAF and Home Team? The above arguments apply as it appears there is no financial adviser responsible.

I recall that during the Lehman MiniBond sage, many investors bought the MiniBond from “Introducers” who introduced these clients to securities firms. It turn out that there was no financial adviser involved. The Introducers denied they were advising while the securities firms claimed to be merely performing a “execution role.” Thus, group insurance seems to be like that. Who is the financial adviser who is responsible for providing advice to the individual employee?

I also see there are huge amount of resource being wasted. As group insurance is not guaranteed renewable, many employees would buy their own personal insurance to cover themselves resulting in duplicates. Take for example if an employee already has a first-dollar as-charge shield plan, he cannot claim from both group insurance and the shield plan since medical insurance is based on reimbursement basis. So I find this duplicate wasteful.

The government should step in and regulate the group insurance market more efficiently such as making it mandatory that the group insurance be both portable and guaranteed renewable. It is time to stop this wasteful duplicate and increase accountability.