Insurance is meant to protect people from financial shocks. Yet many customers end up with products that do more harm than good. Meaningful insurance education must start with honesty: it should openly acknowledge that a number of approved and aggressively sold products can weaken financial well-being rather than strengthen it.
Why some insurance products harm consumers
Several factors explain how products that pass regulatory checks still cause problems for buyers:
- Complex design: Products with multiple layers, embedded fees and unclear payoff structures are hard to compare and understand.
- Misaligned incentives: High upfront commissions and sales targets can push agents or intermediaries to promote products that are profitable to sell, not necessarily best for the buyer.
- Insufficient disclosure: Legal documents may hide crucial costs or conditions in dense language that customers do not read or fully grasp.
- Regulatory gaps: Approval does not always equal suitability. Rules can allow products on the market even when they carry long-term risks for consumers.
- Distribution pressures: Employer programs, digital platforms and bundled offers can nudge people into buying without independent advice or proper comparison.
Common product pitfalls to watch for
Here are examples of product features that often lead to poor outcomes:
- High-commission life and investment-linked policies: These can eat into returns for years and make surrendering or switching costly.
- Riders and add-ons with low value: Small premiums for optional extras might seem affordable but can duplicate cover or provide limited benefit.
- Complex unit-linked plans: When investment performance is linked to insurance layers, fees and lock-in periods can reduce transparency and growth.
- Over-insurance or inappropriate cover: Selling full coverage where a basic safety net would suffice increases premiums unnecessarily.
- Short-term warranties or decline in benefits: Policies that look attractive initially but decline in value over time often leave customers exposed later.
What honest insurance education should include
True education goes beyond marketing materials and sales scripts. It should equip consumers to make informed decisions, by focusing on clarity and practical comparisons:
- Clear cost breakdowns: Show all fees, commissions and expected charges over the life of the product in simple tables or examples.
- Realistic scenarios: Use plain-language illustrations that demonstrate outcomes in different market and life situations.
- Suitability tests: Encourage tools and checklists that match products to customers’ actual needs, goals and time horizons.
- Independent perspectives: Promote impartial advice and third-party comparisons, not just insurer-produced content.
- Questions consumers should ask: Provide a short list of essential questions to raise with any seller or intermediary.
Suggested questions for buyers
- What exactly am I paying for and how do fees change over time?
- How will this product affect my financial plan in five and ten years?
- Are there cheaper alternatives that offer similar protection?
- What incentives does the seller have to recommend this product?
- Under what conditions can I cancel or adjust the policy, and what are the costs?
Roles that must change
Creating an honest insurance education ecosystem requires action from several players:
- Regulators: Tighten disclosure rules, enforce suitability standards and require plain-language summaries.
- Insurers: Design simpler products, reduce hidden charges and present fair performance illustrations.
- Intermediaries: Align compensation with client outcomes, not just sales volume.
- Employers and platforms: Offer independent advice alongside group or bundled offers and avoid one-size-fits-all default choices.
- Consumer groups and educators: Build accessible resources, workshops and decision tools focused on real-world outcomes.
Practical steps for consumers
Individuals can protect their financial well-being by taking a few practical steps before buying:
- Read the summary of benefits and the key facts document carefully.
- Ask for a written cost illustration covering at least five and ten years.
- Seek a second opinion from a fee-based adviser or an independent comparison tool.
- Compare similar products from multiple insurers, not just the first offer you receive.
- Understand exit costs and the policy’s behavior in different market conditions.
Why honesty matters
When education is honest, customers can make choices that strengthen long-term financial resilience. Hiding trade-offs or overstating benefits leads to distrust, complaints and avoidable financial pain. Plain truth-telling may be uncomfortable for some sellers in the short term, but it builds sustainable relationships and healthier markets over time.
Bottom line: Effective insurance education must acknowledge the flaws in how some products are sold today and equip people with straightforward tools to see through complexity. Only then will insurance serve its purpose: protecting, not weakening, household finances.