Question

Azaan has been working for an HDBL life insurance company as a sales representative for
more than five years in Sur, Sultanate of Oman. He achieves his targets on time because of
his product knowledge, good communication and presentation skills. He regularly attends
several workshops on sales and marketing to enhance his marketing and sales skills. HDBL
Life Insurance Company is happy with Azaan's performance and gives him a good salary and
commission on additional sales.
Azaan has several general life insurance products to sell, but the company pushes him to sell
the HDBL-19 plan by offering high commission. HDBL-19 plan is a combination of savings
and insurance and more profitable for the company. The product promises to protect the
family in case of premature death as well as a good return on an investment after retirement.
The language used in the agreement paper is hard to understand. Usually, clients trust on
Azaan and do not read the agreement thoroughly.
Azaan knows that the product is expensive and provides a little protection in case of
premature death. Another disadvantage of having this product is a low return on investment
after its maturity. Azaan has many other low-priced products that can give more benefits to
his clients, but less commission to him.
Question 1
i. Azaan cannot earn a commission, if he sells products considering consumers
benefits. What should Azaan do? Justify your answers with valid reasons.
[3 Marks - Answer in 75-100 Words]
ii. Is it ethical for insurance companies to promote expensive policies by hiding the
facts? Justify your answer with valid reasons.
[4 Marks - Answer in 100-125 Words]
iii. Can Azaan justify himself by saying that hiding the facts doesn’t mean lying?
Justify your answer with valid reasons. [3 Marks - Answer in 75-100 Words]

Answer 1

Sol:

1.

i) Azaan should not cheat his clients by selling them unfruitful products. His clients trust him for his sincerity and honesty. So he should't let personal gains get in between it. Being dishonest will get people by once or twice but honesty will take them a long way. Since the products are life insurance he should not let some mere personal benefits break the trust that his clients have on him.

ii) Hiding things in the fine print may be legal, but it's questionably ethical. The insurance industry is often guilty of many examples of this, such as increasing the annual renewal costs after the first year, or being very specific about what does and doesn't come under the excess. Various medical procedures are considered cosmetic or unnecessary depending on where you live, so how do you know your insurance provider will cover a specific operation or procedure?

Likewise, nobody likes finding out their company is using their money for intentions that go against personal belief. Many companies use under-writers, secondary companies and other means to spend money, create the illusion of competition or simply serve their own interests.

HDBL life insurance company asked Azaan to sell expensive plans for the sake of the company's profit. It may be profitable but it is not ethical and a insurance company should never do that.

iii) Fairness is a fundamental issue involving any dealings you will have with a client.

Fairness is often used in general terms to describe the relative value of a particular deal. However, when applied to financial planning it encumbers you with more specific requirements. Fairness requires impartiality, intellectual honesty, and disclosure of conflicts of interests. In essence, fairness implies a standard of dealing where you would “do unto others” and you would “have them do unto you.”

A primary principle of fairness is disclosure. As a professional, you are expected to disclose all material information that is relevant to the client’s situation. Examples of material information that should be disclosed include (but is not limited to) conflicts of interest, compensation and/or fees, experience and education, and changes in your business affiliation.

It is expected that you will make such disclosures in a timely fashion. Doing so will permit your client the opportunity to evaluate the information and to make an informed decision. Failure to provide the information in timely fashion would place the client at a disadvantage - unfair position.

It is recommended that, prior to providing any services or advice, you should disclose any potential conflicts that might possibly affect your judgment. If the client agrees to continue the relationship subsequent to the disclosure, they cannot later claim they were unfairly prejudiced.

Azaan cannot justify himself by saying that hiding facts doesn't mean lying. He need to be fair and just. He should disclose all the facts that should be known to the clients.