Ethics
Last week we ran a story on replacements, and reader responses have been concerning.
Concerning for a very simple reason - there were so many responses and added to which there were many readers who had similar war stories.
From a broker perspective this situation is untenable. But disappointingly it's also about human nature, and entrepreneurship, and the environment.
Allow me to explain. For any sale or purchase to occur there has to be a buyer and a seller. There also has to be an environment that makes it conducive for a situation to develop. Computer software, CD and DVD piracy is a prime example. There are buyers out there looking for cheap alternatives. Sellers spot the opportunity and fulfill the need. Thats capitalism, or so they tell me.
It's much the same in the medicine industry. The big pharmaceutical manufacturers produce drugs to cure a disease or illness. They justify the exorbitant costs by saying that they need to recoup their development, marketing, legislative and manufacturing costs.
We as consumers agree to pay the fee, and then three years into the life cycle of the product they launch a generic product for a fraction of the cost.
This marketing tactic is employed to defend their product against the generic manufacturers who will undercut their ethic product. So what does this have to do with the life offices?
It appears that in the past the life offices have developed products that lent themselves to entrepreneurial behaviour and didn't always have the consumer or pensioner or investors best interests at heart.
I use the past tense here in the hope that the SOI will act as a guiding light to the life offices in the product development cycle. I use the past tense in the hope that the life offices will not seek arbitrage opportunities in the SOI implementation process. I also hope that the industry players will look at attracting new clients into the sector, and not simply rely on churning to show increased profits to their shareholders.
It's about building ethical products, and reducing the risk of churning and other 'entrepreneurial behaviour'.
