1. Can the cost of insurance be reduced?
Yes. Insurers have to design and market low cost insurance to cover personal risks, such as death, accidents and medical expenses.
The product has to be kept simple. The cost of marketing should be reduced considerably.
2. What about customers who prefer to have a return on their premiums?
It is better for customers to separate their insurance from investments. They will get a higher return on their investments and greater flexibility.
3. Is there still a role for insurance agents?
Yes. The agent plays a useful role to help the customer to get a competitive rate and to handle the paperwork. The commission can be 10% of the low cost premium.
As the premium is small, the commission is small. The agent cannot spend time to visit the customer. The agent has to improve the productvity. Most of the transactions can be handled through the telephone. If the customer has to be seen by the agent, the customer should visit the agent's office.
This is similar to buying stocks through a stockbroker or consulting a doctor.
4. Why are endowment and whole life products still popular in the developed markets?
They are popular in the markets where the customer can reduce tax by buying these life insurance products. The marketing cost of these products can be covered by the tax savings and still give a net benefit to the customer. The insurance adviser has to find the right customer who can benefit from the tax savings.
This situation does not apply in Singapore, as there is negligble tax savings from life insurance products. The marketing expenses eats into the investment return. Hence, it is better for the investments to be separated from insurance.
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