Prudential - Agency Driven By A Culture of Fear

The departure of 244 agents and agency leaders from Prudential Assurance Company Singapore in 2016 was "a long time coming", with a cost-cutting exercise by the life insurer adding to unhappiness, the High Court heard on Friday (Aug 30).

Regardless of whether Prudential's former top agency manager Peter Tan Shou Yi had attempted to solicit any of them, the root cause of the departures would have been personal reasons, argued Mr Tan's lawyers, led by Senior Counsel Thio Shen Yi, in an opening statement.

This could include unhappiness with the firm and better prospects elsewhere. Mr Tan is being sued for up to $2.5 billion for allegedly instigating the mass defection to rival insurer Aviva Financial Advisers in mid-2016.

On Friday, Mr Thio said the claim amount is "not genuine and not made in good faith", taking issue with the way it was calculated. Among other matters, he said the calculation ignores moves that would have caused a loss in productivity, and also ignores personal circumstances.

While Prudential made a case that Mr Tan breached contractual and fiduciary duties by poaching the agents while he was still with the company, Mr Tan is disputing this.

Ms Wendy Ho Xiang Yu, a former agency leader from the Peter Tan Organisation (PTO) which Mr Tan built, testified earlier this month that she was driven by a culture of fear to go along with plans to defect to Aviva, but Mr Tan contends that there was already discontentment to begin with.

Since as early as 2010, market and regulatory changes drove many agency leaders in PTO to want to switch to a financial advisory model, allowing them to sell insurance products from multiple companies instead of just Prudential.

"There were several attempts by PTO to discuss a financial advisory with Prudential," the defence lawyers said in court documents. "Time after time, Prudential changed its mind at the last minute and was unresponsive. At the same time, and also as a result, the agency force accumulated distrust and unhappiness over the years," they added, arguing that events in 2016 were a tipping point.

After Mr Philip Seah became the chief executive of Prudential in December 2015, the company introduced changes including cost-cutting measures that hit PTO.

A top-performing agent could stand to lose more than $30,000 in annual incentives due to the changes.

A group of senior agency leaders started meeting in January 2016 to discuss the changes and revisit the financial advisory model as the tied agency model was "increasingly seen as unconducive for future growth", the defence lawyers said.

They approached Mr Tan the next month and by April 2016, he, the senior agency leaders and a majority of others in PTO reached a consensus to leave Prudential.

While Ms Ho earlier testified that her fear of Mr Tan motivated several of her actions - including joining a Guangzhou trip to discuss the move despite her misgivings - Mr Tan's case is that undecided parties had been informed they should not attend the meeting.

The defence said as well that 1,137 people left Prudential in 2016, a record number even if the 244 defecting agency leaders and agents were excluded. It added that Mr Tan did not have "any non-solicitation contractual obligation", is not a fiduciary of Prudential and "did not engage in any alleged acts of solicitation".

In an oral statement on Friday, Mr Thio said Prudential is unable to prove that Mr Tan made representations to each of the agency leaders who left. Even if agency leaders informed agents about the opportunity at Aviva, Prudential would have to prove that they left because of the agency leaders' persuasion or enticement, he added.

The defence also said that Prudential has failed to show that it suffered losses caused by Mr Tan's alleged breaches, and that the company failed to mitigate its losses.