Concerns over sales practices of investment and insurance products
A Consumer Council survey has uncovered areas of concern over certain sales practices of financial institutions in marketing investment and insurance schemes.
In the present low interest economic environment, consumers are increasingly turning to alternative savings and investment products for capital preservation and higher interest yields.
To cater to this growing demand, financial institutions have been active in the selling of a diversity of investment and insurance products to the retail customers.
But problem occurs if front-line staff do not possess the necessary training and knowledge to provide sufficient information and give sound investment advice. Some may also be under pressure to meet sales target or motivated by the commissions from the transactions.
The problem is all the more acute when such marketing is directed to the more vulnerable customers - the elderly - who have little or no knowledge in investment. There have been cases where elderly customers (usually term depositors) were persuaded, allegedly with high-handed sales tactics, into buying investment funds unsuitable for their purpose.
The survey and complaints lodged with the Council have also found incidence of misleading claims and information being given to customers, which commonly include:
- Insurance savings plans being marketed as savings products claiming the insurance is free. The truth is the insurance cost has been incorporated in the premium.
- Return on insurance scheme is not guaranteed contrary to general impression created. What actually happens is that the expected surrender value is made up of both a guaranteed and a non-guaranteed portions. The total amount is only a projection based on the current dividends and dividend accumulation interest rate.
- A dividend accumulation rate of 6% per annum does not mean a return of 6% per annum on your investment. The dividend accumulation rate is the interest rate applicable to the dividends earned and not applicable to the total premiums paid. There might be a large deviation between the expected return and a return of 6% as expected by consumers.
- The cost of early surrender is not properly disclosed to consumers. A large portion of the premiums paid in early years are used actually to pay for the sales commission and the administrative fees of insurance companies. Thus, upon early termination of the policy, the surrender value is extremely low and consumers usually incur loss.
- Marketing of wholelife insurance products to clients as savings products. Wholelife insurance provides higher insured amount but less savings as compared to endowment insurance. The marketing of wholelife products to customers who expect to join savings plans is totally inappropriate.
- Unauthorized marketing materials were found to be produced by insurance agents, with claims on the growth figures and surrender values without disclosing that these are estimates only, and without disclosing the assumptions on which these are based and which may or may not materialise.
Financial institutions are urged to provide sufficient training to front-line sales staff to ensure they act in a professional manner in providing fair and objective recommendations to customers.
They should also have internal monitoring procedures in place to ensure their staff will act in accordance with professional codes and in the best interest of customers.
Consumers, on the other hand, should always seek clarification of unclear jargons, terms and conditions, fees and charges. Never sign an investment plan in haste, or join a plan as a favour. For the elderly in particular, first discuss it with family members before any further commitment.
More Chinese medicine clinics opt for charging patients in advance
A Consumer Council survey has found that increasingly Chinese medicine clinics are offering prepaid treatments with competitive discounts.
Unlike traditional herbal shops, these Chinese medicine clinics operate in modern environment with independent consultation rooms and a team of Chinese medicine practitioners providing multiple Chinese medicine therapies and treatments.
With the introduction of the new regulatory regime for Chinese medicine practitioners, such clinics are expected to grow in number.
Of the 14 clinics surveyed, half of them were found to offer treatments by prepayment with discounts ranging from 10% to 25%.
It is, however, not without strings attached. Invariably, some restrictions apply such as non-refundable (4 clinics), expiry date (3 clinics), no exchange for alternative treatment (1 clinic).
Further, 5 of the clinics surveyed were found to offer membership at an annual fee of a mere $50 to, in one case, as much as $3,880.
Membership entitles the patients to such benefits and privileges as special discounts on consultation and medicine, priority treatment and VIP room, and even shopping discounts for herbal and health products. But again a common restriction is: membership fee is non-refundable.
The accumulative amount of money involved in prepayment and membership fee collected by these clinics over time is potentially substantial.
Consumers are urged to weigh the benefits against the risks of default or closure by the operators as there is no specific legislation to safeguard their interests in prepaid consumption.
In the survey, 3 of the clinics actually bear the name in Chinese "Chinese Hospital" though they operate only out-patient services. But because these premises are used exclusively by Chinese medicine practitioners in the course of their practice, these so-called hospitals are excluded for registration under the Medical Clinics Ordinance.
In the first 11 months of this year, the Consumer Council has received a total of 20 complaints in relation to Chinese medicine practitioners.
In one complaint case, a consumer prepaid $2,000 for 10 medical treatments of acupuncture. In her first treatment, she experienced pain but was told that such pain was normal. However, after her second treatment, the pain persisted and rash began to appear on her hands. She requested refund which was turned down. The clinic later agreed to change to another treatment. She still experienced severe pain after the new treatment. Similar cases of consumers not responding to treatment are not uncommon.
In another case, a consumer responded to a newspaper advertisement about "free consultation" by a Chinese medicine clinic. But first he was asked to pay a registration fee of $100. Then, after consultation, he was asked to take an X-ray examination (at $840) and also prescribed 30 dosages of Chinese medicine (at $68 per dosage). He was further persuaded to buy other health products valued at $640 per box. The consumer became suspicious and had to settle for $940 as the registration and X-ray fees before leaving.
The Consumer Council has the following advice to offer to consumers:
- Ask in detail about the service charges before accepting any medical treatment.
- If a patient is uncertain whether he or she will respond well to a treatment, e.g. acupuncture, it would be prudent to consider single treatment payment instead of multiple treatments prepayment.
- Seek a second medical opinion or more if in doubt.
- Ascertain if the Chinese medicine practitioner is either registered or listed as required by the law now.
Inadequate protection against abnormal conditions in oil-filled electric heaters
It's time of the year to turn on the heat to beat the cold.
A most topical test report was released by the Consumer Council in its December issue of CHOICE - on 9 models of oil-filled electric space heaters.
For safety, a paramount consideration, the samples were tested with reference to the latest requirement of the International Electrotechnical Commission Standard (IEC60335-2-30).
All samples, according to the latest test requirement, had one thing in common which renders them less than completely safe: the absence of a non-self-resetting protector which will totally shut down the appliance in the (unlikely) event of oil leakage.
Prolonged operation under such abnormal conditions could damage the insulation properties of the heater posing risk of short-circuit.
In the test, it was also found that the stability of these usually heavy oil-filled heaters left much to be desired. 5 out of the 9 samples were at risk of toppling over at an inclination angle of 15°.
Parents are strongly advised to keep young children away from these heaters to avoid accident.
With few exceptions, these brand new oil-filled electric heaters were found to emit a smell of various intensity for different models. The smell is believed to be caused by residues of oil or other volatile compounds on the heater assembly.
Manufacturers are urged to solve this problem of smelly oil-filled heaters.
On the whole, the heating performance of the models was considered quite similar though a very few samples were measured to generate less heat than others.
Consumers are further advised to take the sensible precaution not to put wet clothes on or let hanging curtains cover the heater.
And as an electric heater consumes high power, it should not share the same socket outlet with other electric appliances to avoid the risk of overloading.
To save electricity, users should adjust to the suitable thermostat setting rather than always leaving it at the maximum setting, and switch off when use is not needed.
Survey on weight and measure of carry-on baggage for air travel
Carry-on baggage for air travel is subject to the most stringent of security inspection these days.
But security is not the only requirement of airlines for carry-on baggage, which needs also to comply with weight and measure restrictions.
A Consumer Council survey of 21 airlines found great variations among the airlines in respect of the maximum weight allowance for hand-carried baggage.
It could range from 5 kg to 23 kg, a difference of 18 kg or 3.6 times between the least and the most.
However, in respect of the size or dimensions of carry-on baggage, it is standardized for all aircrafts leaving Hong Kong by the Airline Operators Committee(AOC).
The AOC specifies that the dimensions of carry-on baggage carried on board an aircraft shall not exceed 22x14x9 (inches) or 56x36x23 (cm). Measuring gauges can be found located conveniently around the airline check-in areas for the reference of consumers.
Individual airlines allow different personal effects for passengers to carry on board - infant cot or car safety seat for ticketed children, infant food or nappies (for in-flight use), and an infant collapsible pushchair - if cabin storage is available.
Some airlines even allow one wheelchair or other assisting device per customer if necessary.
Strict security requirements mean an array of objects that are considered sharp and potentially life threatening, will not be allowed aboard - paper knives, scissors, steel nail files, household cutlery, knives with blades of any length, razor blades and knitting needles, etc.
Car crash test shows improvement in occupant protection but pedestrian protection remains a problem
Car manufacturers are continuing to improve the overall safety of car occupants.
This is the assessment of the latest in a series of car crash tests of the European New Car Assessment Programme (Euro NCAP) which the Consumer Council has participated since 1997.
In this issue of CHOICE were reported the test results of 22 models of car available in the market in Hong Kong - 7 large and small off-roaders, 5 large family cars, 3 executive cars, 3 sport cars, 3 super minis and 1 small family car.
For the first time a small family car has achieved 5 stars maximum rating in occupant protection. In addition to the small car, four other cars have also achieved 5 stars.
The majority of cars have achieved 4 stars in occupant protection, only 2 cars achieved 3 stars. The International Consumer & Research Testing (ICRT) considered that 4 stars rating is now the absolute minimum one expects in crash safety tests.
While the occupant protection in cars is increasingly rising, pedestrian protection still holds a large potential for improvement. Most car achieved 1 star out of 4 stars in pedestrian protection, and only 1 car achieved 3 stars rating, the highest score among the cars tested this year. However, it is disappointing that for the first time, 1 car achieved no score in pedestrian protection.
Choosing a multi-function PDA that suits your own personal needs
If more is necessarily better, then PDA (Personal Digital Assistant) is definitely for you.
Today PDA incorporates a wide range of functions into one single device. Besides the traditional office functions, they cater also for the fun side like playing music, computer games and digital photography.
The Consumer Council has tested 12 PDA and 5 PDA phones. The majority of them come with colour screens. The PDA samples were assessed for operating performance, ease of use, versatility, screen quality, battery performance, portability etc. For PDA phones, the communication ability is also assessed.
PDA is a personal item and different people may have different ideas of their own requirements. While the models with high overall score in the test have comprehensive functions and good performance, it is nevertheless worth studying the features listed in the result tables before making your purchase decision. You may be able to find one with a slightly lower score but at a more attractive price which suits your needs and usage pattern.
Chairing the press conference today (December 16) on the publication of CHOICE issue number 314 is Dr. Matthew NG, Vice-Chairman of Publicity and Community Relations Committee of the Consumer Council.