Are Insurance Agents still needed today?

Not too long ago in the news, the government passed the regulation regarding rebates towards general insurance. Meaning, whoever who went directly to the insurance companies to purchase general insurance could get a further discount. (while traditionally consumers went through agents who earn a commision). Click here for that story.

This sparked a journalist in the Star to request the same for life insurance. (The Star Business News "Extend Rebate to Life Insurance too" Click Here for the article) He mentioned that consumers should have a choice if they wanted to go through life insurance agents. In summary, he discussed on two issues:

Firstly, He felt since the consumers are becoming more aware and financially acute, they should have the free choice of going to insurance companies to purchase insurance themselves, and get a cheaper rate for insurance (just like what is being done in general insurance). IE: CONSUMERS ACT AS THEIR OWN AGENTS, Handle their own claims, etc.

Secondly, he also mentioned that instead of having insurance agents, Malaysia should move towards FINANCIAL ADVISORS (just like in Australia) to increase proffesionalism..


So does that make sense? Should insurance companies allow consumers to go directly and in return the consumer gets a cheaper rate ? Well, if you look at it from a consumer perspective, minimizing costs and maximizing benefits, perhaps cost wise, it is better since its cheaper. BUT REALLY, IS IT BENEFICIAL for the CONSUMERS TO BE YOUR OWN AGENT? And really, should agents move towards being financial advisors? Read on...

- Firstly regarding the role of agents...
All insurance companies alway seek a better way to distribute their products, to be more efficient and cost effective (again looking at minimizing costs, maximizing benefits). With the creation of internet, there was an opportunity to sell insurance through the internet, hence eliminating the role for insurance agents.

Many thought that the life insurance agents days are over, as clients have the choice of going through the net for their policies..which is considered very easily done as no physical product need to be delivered. Click to sign and pay online.

The reason why the agency is still needed today is that insurance need to be sold rather than bought. The urgency of owning an insurance policy has always been there and yet many procrastinate to buy as it is deem as not urgent until needed (when an unfortunate event occur). Also, for the insurance life fund to work, it needed a large pool of contributors. If everyone waits till they feel they need insurance only then they contribute, the fund will fail itself.

-Secondly, regarding the move towards Financial Advisors
As for the Financial Advisors, no doubt that this will lead to greater professionalism. However, no one individual can be good in every area. The role of a FA then is to help client diagnose their financial problem in general, and then refer to the specialist when necessary.

An example is, if the problem is risk managment related to medical care, refer to a life insurance agent or if the problem is estate distribution, then an estate planner is more appropriate.

Moreover, if people begin to think that when a country is developed there is no need for agents but just financial advisors, can anyone explain why in the United States, a country way more developed than Malaysia still has insurance agents.

Hence, specialisation is still the key. Agreed, the government should regulate the industry to allow agents to be professional in their field (though courses required by Bank Negara). Yet, to fully move into FINANCIAL ADVISORS would be going back to generalization (rather than specialization).

So back to the question: Are Insurance Agents still needed today?
Looking at the current industry environment, time in history, nature of the product, and the size of the market, YES.