I can't think of a better quote for times like these. Indeed, we are going through a historical period. I was too young and too oblivious previously to understand the impact of the events going on around us, but now that I do, it's really something.
What am I referring to? The eventful weekend in the financial sector! It's not everyday that we get to see banks collapse, or bought over, or a major insurer on the brink of failure. That's not including the amazing speed in which takeover/merger/acquisition talks were held and concluded.
Of course, if you have totally no idea what I'm talking about, or roughly know what I'm talking about, that means you're just like me in the past. And FYI, that is rare... VERY RARE indeed.
Undoubtedly, there's a lot of fear in the market. People are worried about what happened to their money. For those who bought the Lehman minibonds, it's not valued at only 30% of your invested value, which means for every $1 you invested, it's only worth $0.30 now. Mind you, Minibonds are NOT bonds... they're actually equity-linked investments.
Another major panic was AIG, which came within a sniffle of filing for bankruptcy. In fact, I think that caused a larger panic here in Singapore. Just look at the long queues outside AIA Tower! Despite MAS' reassurances that insurance funds are safe and separated, and I'm very certain of this because of the legal framework that insurers operate under in Singapore, people are still queueing up to pull out their money.
Why is this so? Does it make sense? The money's safe, what for withdraw? There's only 1 explanation: Fear
Yes, fear! People are scared. It doesn't matter what facts and reassurances you give them, they're just afraid, and they will not listen much to reason. They want the assurance that their money is safe, and nothing beats holding it in cold hard cash, who cares whether the amount is lesser than what they put in, all they want to know is they are holding on to COLD HARD CASH!
And who can blame them? Why are people reacting this way? It's back to another word: assurance. Insurance companies are supposed to provide the assurance that when something happens to you, you are protected financially and there's a sum of money to tide you through your hardship. Many times, I find insurance is actually more of an emotional concept than a rational one. Of course, I still encourage proper insurance planning, it's still something that one should not go without. What I'm saying is that a lot of emotions come into the process.
When this trust between the insurer and the consumer is breached, that's when people feel scared. No doubt, the credibility of AIA is downgraded in the eyes of the general public, despite their balance sheets and the authorities saying so.
And this translates a lot to us individuals too, right? When someone betrays your trust, regardless whether by his/her direct actions or otherwise, don't you find that you have much difficulty putting your trust in this person again? How then can you regain such trust? What would you do if you were the one who betrayed another's trust?
Certainly makes you wonder, doesn't it?
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