Tan Kin Lian's Blog: Higher cost of Vivolife

Thursday, February 07, 2008

Higher cost of Vivolife

Dear Mr. Tan,

An NTUC agent approached me to sell the new Vivolife product. The return from this product is lower than a similar product that was being discontinued.

The agent claimed that the commission is not significantly different. Why is the return from the so much lower?

REPLY

I am not familiar with the new product. My understanding is that the charges are higher to cover the following:

a) Higher commission to the agent
b) Higher advertising expenses
c) Higher profit margin
d) Cost of the additional benefits (or frills).

I suspect that the yield for the period of premium payment could be quite low. You should ask the agent to compute the yield, based on the cash value at the end of this period. If the net yield(after deducting all the costs) is still more than 3%, you can invest in this product.

If not, it is better for you to follow the advise in this FAQ:
http://www.tankinlian.com/faq/savings.html

Gong Xi Fa Cai.

7 comments:

Anonymous said...: The old product reached a fatigue situation that agents no longer are excited to sell them; not as enthusiatic as it was first launched.
The marketing was called in to revive but with a new marketing concept and a new product.And Vivolife was born , not at the actuary department but at the marketing department. You can see marketing plays an intense role in this product and the earlier product revosave.
The 2 pronged approach is to have "new" product with a lot of rubbish frills and with marketing message to confuse the public. The agents are "coached" to repeat the message and present it with robotic precision.
Why no yield given? Unlike Mr. Tan's time, the public benefit was main concern. Now? no. The agents are coached to avoid talking about yeild. They were coached to talk rubbish, like live life to the fullest, retirement, freedom. The message doesn't make sense and is full of contradictions. How to have retirement when yield is so low?
Worse ,many useless features are thrown in to further confuse and to mislead the customers.
Another worse, the agent don't know how to use the financial calculator. Their title is financial consultant. What a joke with title like that and yet don't know to calculate the yield. The title misleads the public.
Is vivolife good? The verdict is vivo life is a bad product. Term is still number one.It lets you take care of your needs FULLY and ADEQUATELY and EFFICIENTLY AT THE LOWEST COST.; February 07, 2008 11:50 AM
Anonymous said...: It is true that NTUC is using vague language to market its products. Wonder what it is up to. It is no longer straightforward. The message is twisting and confusing.If someone didn't explain to me in clear simple language what i wanted i would have bought the revosave. I would have foolishly gotten myself into this trap, this 5% cashback which is misleading.I though it was too good to be true and it was.
Those who are accosted by ntuc agents for this product got to be careful. Try to understand and if possible seek second opinion before committing. One mistake and you are locked for life unless you are prepared to sacrifice a loss. But why should you when you can take precaution.; February 08, 2008 12:13 AM
Khiat Han Hwee Adrian said...: 1) The commission to the agents are not higher. In fact, its lower for the shorter term plans.
2) The yield is about 1% lower because of the lower premium compared to the old Plan. Naturually smaller amount is invested into the Life Insurance Fund which explains the lower yield.

Adrian Khiat
http://akhiat.blogspot.com; February 10, 2008 12:59 AM
Anonymous said...: You are wrong the yield is more than 1% lower than the previous plan which was already returning miserable return.It is inevitable because of high operating cost. During Mr. Tan's times the expense ratio was kept low.
Now with more high profile senior managers and ceo and drastic retro fittings, intense marketing , they add up to the cost.Who pays all these costs. all The agents? the management?.Of course the customers. The greedy agents won't work if there is not enough commission to push them.
As a result, the customers pay for the expenses and get low return.
You don't need an accountant to tell you high expenses eat into the return. Where are the cooperative values you hear some agents were saying. They used to boast that 98% is returned to policyholders. How?
I think they go to pay all the high salaries to new mangers and giving extra commission to agents for certain products.Example; previously Growth Plan wasn't selling, now with more commission the agents think of extra lies and braver in the misrepresentaion.; February 11, 2008 11:19 PM
Khiat Han Hwee Adrian said...: A few misconceptions I like to clear with regards to NTUC Income.

1) The commission for agents in NTUC Income have not increased.
2) Many non-performing advisers and managers are chopped to reduce cost.
3) Many offices in NTUC Income are moving to lower cost locations.
4) I don't think the cost of distribution increased a lot. In the past, generous freebies such as MP3, air tickets, etc was given out for each policy taken. Nowadays, only a very small token was given out. This is a lot of savings to the company in the first place. Btw, did anyone see TV advertisement for any product nowadays compared to the past?
5) Renovating the main office building doesn't mean the CEO is trying to spend money. It is just part of the maintenance cost by the company. Our office are generally old.

I'm trying to be neutral and hope to clear some air about the company.

Adrian Khiat
http://akhiat.blogspot.com; February 12, 2008 10:47 AM
Anonymous said...: Can you explain why the yields of those newly launched products, revosave and vivolife, are low?
Simple, cost eats into return. The operating cost has gone up. How did it go up? Unnecessary spending of money, especially policyholders' money on unimportant things. High salaries to newly recruited senior managers. High commission and unnecessary high advertising cost. Unnecessary spending on 6 star hotel to hold meeting. They all add up to a lot of money and where is it from. If it is not from policyholders' money, is it from the senior managers' pockets?
What cooperatives values? Only add values to the pockets of insurance agents and managers at the expense of customers. Products are rip off.
During Mr. Tan's time the yeild was high, there was value for money. The poor were the main concern. This is the cooperative value. Ask yourself, how many of your customers are poor and how many are rich.Do you think revosave can help the poor to save for retirement? Are there no better ways?You are not honest if you think the products are good for the poor.There are other simple products that can do very good job.
Think about it and search your conscience whether you have been thinking and meeting the needs of your clients or you are thinking of your own interest, scheming and concocting lies and means to sell to your clients.
Now the CPFLife is in place. Let us see what the agents can come up with to rob the retirees of their hard saved money.; February 15, 2008 7:20 PM
Anonymous said...: Referring to Zhumeng's first post, I concur with him financial consultants are quite a joke in that they do not even understand how to use financial calculators or the concept of time value of money. Maybe MAS should enforce them to take some additional papers which will ensure they at least understand these concepts. This will definitely raise the standard and filter those who are not even in a position to advise. Basic number skills is a necessity to be professional in my opinion

CPFLife is probably one of the best annuity schemes around. This is because there is no commission fees. The admin expense is also probably lower. On top of it, CPF gives the best risk-free rates. Insurers will have a hard time selling annuities. It may also be possible new breeds of annuities ma y emerge in the near future, such as variable annuities.

To be fair, each insurer has their own fair share of lousy plans. As consumers, be prudent and open your eyes big. Personally, I highly recommend the Family Insurance Plan from Income due to its high flexibility and low cost structure. It is one of the few plans which you can customize a very good and low cost solution. And of course, the commission is so low no agent will even tell you of its existence.

blackbox; February 23, 2008 10:52 PM