Is a high % agent commission contract clause fraud in your jurisdiction?
Here is the problem. This seems to only happen in insurance industry. Basically we have this insurance product called unit link. Update: In Indonesia many insurance companies charge high acquisition costs. So 100% of premi is gone to pay for the acquisition costs. Actually the total amount gone is about 230% of yearly premi.
Things get interesting because in some companies, even when the insurance benefit only worth $10, an agent can set premi to be very high (thousands of dollars or even more) and claim that all money are "invested".
So basically customers put $5k on "investment". Agent says "all are invested." Customer thinking that all are invested put huge money only to see all those money are gone for fees.
Customers got almost nothing. All money are gone for acquisition fee. About 50% is to pay insurance agent. Customer also get Insurance protection worth $10 and An option to "continue" the "investment" where customers will lost even more money for insignificant insurance cost.
Basically customer miss the part where it says that 100% of premiums are gone for acquisition fees. It's written in contract but quite well hidden among terms that's not important due to low insurance portion of the arrangement (like how to file a claim).
The customer is negligent in not reading a part of the contract that says that there is a huge acquistion fee. However the part of the fee is well hidden inside other terms and the agent already said all are invested.
The question is this. Why doesn't this happen in bank and other places? Why only in insurance we have this problem?
When we put money in bank we don't check that all money are "debited" right? We don't make sure that there is no 100% acquisition fee on all money we deposit?
When we buy stuff from supermarket we don't read contracts to make sure that we don't owe them 1 million dollars buy buying a bubble gum. But why this can happen in insurance industry in Indonesia?