Finance fraud: The sequel?
Should we expect to witness a second meltdown in the financial services sector? Recently the newspapers have reported the controversy surrounding Manulife life insurance provider's performance and financial integrity, or lack thereof. Back in 1997, about the time the banks were being discredited, insurance companies began to mushroom, at least in Medan. One had to wonder where all the money to open offices was coming from. Did the same people who had milked the banks move into insurance (which like banks attracts large numbers of small depositors)?
Some insurance companies use high-pressure tactics and questionable explanations to sell their products to low-income office workers. Conversations with these young workers suggests that many have little understanding of how their policies work, except that they have been led to expect large payments at some point. And they hesitate to probe the sales agents for clearer explanations.
If nothing else, the Manulife case should prompt the government to ensure that insurance companies are properly capitalized and regulated. Otherwise in the future there will be untold numbers of disappointed working-class claimants who can ill afford to lose their insurance investments. The need for regulation has been mentioned from time to time in the media, but there is little indication yet that that has happened.
DONNA K. WOODWARD
Medan, North Sumatra