Tan Kin Lian's Blog: Insurance agents need to make a living

Friday, February 22, 2008

Insurance agents need to make a living

Dear Mr. Tan,
If life insurance agents sell only term insurance, how can they make a living? The commission is very small.

REPLY
Many insurance agents make a living by earning a earning a commission of $30 to $50 by selling a general insurance policy. They are able to earn an adequate income by selling a few policies a day. In their case, the customers buy from their office. They earn commission on the renewal of the policy.

It is possible for life insurance agents to make a living by selling low cost insurance, such as term, medical and accident insurance. They have to change their business model, to be similar to general insurance.

When a life insurance agent sells term insurance, the customer is likely to ask for a large protection, e.g. $300,000 and pay a premium of $300 a year. The commission can be quite adequate.

15 comments:

Anonymous said...: Agents are cost centres for consumers. This layer of business model should be remove totally.; February 22, 2008 10:17 AM
Anonymous said...: Yes, agents need to make a living BUT NOT AT THE EXPENSE OF THE CUSTOMERS.
Agent must not make this as an excuse. If they are just thinking of making a lot of money and nothing else, I suggest they rob a bank; make or break.
As Mr. Tan says the general insurance agents make a good living by selling term plans. Why can't life insurance agents?
If life agents want to earn a good living they must show that they can add value to customers and get referrals from clients but not robbing by selling rubbish and inappropriate products that benefit themselves and not the clients.
They think that insurance is a get rich quick scheme. Many join because of this.
There are a lot of this kind of agents and that flabbergasted the public. You watch those roadshows that are mushrooming every from malls, mrt to roadsides, geylang, and underpass. They are selling rip off products to unwary passer-bys. They sell harrass sell harrass and sell and sell. It is a numbers game. There will come a sucker if they harrass enough number of people.If they can have 5 suckers a day, imagine the amount of commission they get.That might be more than a CEO's one day salary.
They are public nuisance.They are not interested to advice you.
I wonder how can one engage an "adviser" from the roadside and expect him or her to be an exceellent, honest and competent enough to take care your financial future, such important matter. It is akin to engaging a lawyer or a doctor selling his or her service at the roadside or at the waterloo street open mall.
The decent place to talk about your future is in the NTUC business centre or in your home. The best person is an adviser and not a salesman.; February 22, 2008 10:32 AM
Priyadi said...: my suggestion: demand a regular wage. or at least try to get them sign an exclusivity contract, so that they limit the number of agents competing with you.

there are simply too many agents. it is impossible for an agent to sell life insurance in volume. if enough agents demand regular wage, they will think twice before hiring another agent.; February 22, 2008 10:41 AM
Khiat Han Hwee Adrian said...: * A term policy of $300/yr or $25/month.
* A 10% commission = $2.50/month.

* He sell 20 policies of $300/yr Term policy everyday and earns $50 commission.

Assumed the agent works 30 days a month without rest, he earns $1,500/month.

He pays $800 for office rental, $200 for utilities, $200 for transportation, $200 for food, $200 for other items. His salary is $0 and potential losses to his business.

He spent hours giving advice to public on how to plan. He recommends ETFs and Index funds where he earns nothing. When people need their service, they call him and ask everything under the sky.

The best thing is, he must sell 20 policies daily just to breakeven without salary. The next best thing is where to find an office that cost only $800/mth nowadays.

It is not like stock brokers, it is easy that they transact 20 buy/sells a day. It is not easy for agents to sell 20 term insurances a day.

The best solution is for the industry to run without agents because it is not viable to make a living as an agent under the perfect market.

Adrian Khiat
http://akhiat.blogspot.com; February 22, 2008 10:52 AM
Anonymous said...: Adrain Khiat, you are in the wrong business. If you think that it is not lucrative enough you should switch your profession. Ask the lawyer, they will tell you insurance agents are lucky that they can solicit anywhere
and in the street but they can't despite having 4 years of grueliing
study. Agents? only 3 months and you expect to earn how much?; February 22, 2008 11:57 AM
Anonymous said...: Mr. Adrtain, you are supposed to be a financial doctor. if you consult on common flu only you get less because there is little examination.If you provide a whole body check you get more. If the patient dies you charge $500 for death cert. You see, if you provide comprhensive services you will earn a lot more.
Like if you sell term, you get less. What about others like giving advice for retirement, education and investment.But if you focus on insurance only you are a DINOSUAR.
It is your fault for not upgrading yourself. The commission must be cut and that is what the public see the worth of your job. It is too easy a money if you are selling insurance. I hope MAS will review and see how many agents should be axed to fill up more vacansie in other industries like the IRs, hospital, construction workers, maids, clerks and Mcdonald cleaners, without having to rely on foreign workers.They are causing social problems.There is a pool of workers here for government to tap; February 22, 2008 3:46 PM
Anonymous said...: Yes, Adrian, you have a good point.

If the money is not enough why waste time in this profession where people expect you to volunteer your time and hardly value your services and knowledge? You also have mouths to feed, if not now, then perhaps in the future.

How many people would buy a $300,000 term policy? Personally, I don't even have $200,000 coverage (which according to Mr. Tan's reasoning is already quite a lot of coverage).

If someone buys $300,000 coverage, would he/she buy again next year or 2 years down the road? Of course not, it is a one-time sale.

Going by these calculations, if you sell 20 $300,000 policies daily, by end of 1 month (working only 25 days), you would have sold 500 policies; after 1 year, 6,000 policies, after 3 years, 18,000 policies.

If there are 300 such hardworking and dedicated agents doing the same time, after 3 years, nobody need to buy any policies anymore as every singapore resident would have a $300,000 coverage.

You can conclude that when people buy only term plans and when people invest in ETFs/index funds, the insurance profession is not a line that you can make a decent living.

I disagree with Mr. Tan's view that insurance agents is able to earn an adequate income by selling a few policies a day. My reasons as above. If there is a person doing exactly what Mr. Tan has suggested (selling only term and recommending ETFs/index funds), he would not even last 3 years in the business.

Let's not give false hopes to young impressionable minds.; February 22, 2008 9:22 PM
Khiat Han Hwee Adrian said...: I am in a meaningful career though I am not earning as good an income as many of my friends and colleagues. I'll stay until its proven that agents are not necessary in this industry or monetary conditions force us out.

I do not just sell Life Insurance, I also depended upon General Insurance, Commercial Insurance, Investments, Medical and Term Insurances for a living.

I had personally seen a customer at his death bed. I helped his widow and children with funeral and insurance claims. I had helped with so many claims ranging from Critical Illnesses to hospital. I know I had contributed to the society and I feel good about it.

I am passionate about this role in society and I feel it is unfair for all agents to be scolded as if all of us are liars, cheats and useless people. I strongly believe that there are good advisers around who do their job properly.

Adrian Khiat
http://akhiat.blogspot.com; February 23, 2008 8:32 PM
Anonymous said...: Anyway, the fight for buy term invest the rest will just be an ideological fight. Let me put it crudely. There must be suckers in this world for others to benefit.

Suckers who buy whole life so that we can have a vibrant insurance industry and people can have jobs. If everyone buys term (which will never happen), then all insurers may as well close shop and we have only NTUC Income, our home insurer. And more people be sacked as less jobs are needed. This is unless we have a larger mass of population (like US/UK).

The same goes for investing. If everyone is cool-headed and clear-minded, then investing will not work. Investing works because of herd mentality and dumb investor behaviour. This creates opportunities for wealth transfer. And few people will buy an index fund because it does not sound sexy.

blackbox; February 23, 2008 11:06 PM
Anonymous said...: I admire your belief and determination to prove yourself. Adrain, let me ask you, is it satisfying to you that you just bring a cheque to the widow or the deceased spouse? Are you happy that the cheque is only enough to clear up the deceased's last expense or the cheque that is going to take care of the deceased's dependents' every need for many years as if the deceased is still around?
The problem is many, many insurance agents fail in the later. They think a cheque of any amount is enough. I feel that these agents are potential defenders in a negligence suit.
All this happened is becuase agents are greedy and never have the interest of the client at heart and only sell whole life for higher commission. This is the truth, isn't?; February 23, 2008 11:13 PM
Anonymous said...: To Adrian

I think you missed the point that Mr. Tan is driving is that agents can earn a living buy selling term and recommending ETFs/index funds.

Since you said you delivered a death claim cheque to a customer, I think you would agree that if he had gotten all term policies, the customer would have been better off - given the fact that with the same premium for a whole life plan would get a person a higher coverage with term plan.

if you delivered a pantry cheque from a whole life policy or endowment, then you have done the family an injustice.

Try not to confuse the matter with you have "made many claims for many clients" yada because it doesn't justify you selling whole life or endowment plans just to pay yourself (and your so-called "hard work") at the expense of other people's ignorance of buying term and investing the rest.

Since you are so "passionate" about what you do, you should follow mr. tan's example - help your existing customers with whole life plans or endowment plans to convert them to term and invest the rest, rather than earning renewals. That is thinking in your customer's interest.; February 25, 2008 4:02 AM
Anonymous said...: Hi Adrian,

I think your calculation is wrong. If the commisssion is 10% per month, then it is correct that the agent will earn $1500 for the first month. But subsequently, don't forget that he is still collecting the commission from the first month. Hence, he will earn double on the following month. It is definitely not a problem to make a living.

If the agent only earn a one time commission. Then it is not 10% commission. That is 0.83%. Please clarify your statement.; February 25, 2008 3:54 PM
Anonymous said...: The premium is paid yearly.; February 25, 2008 10:10 PM
Anonymous said...: NATO, no action, talk only.

With all the commenting, why not those who think they can do better job than condemning agents, become one good agent and serve the community like Adrian.

Who cares if all of you dies discussing coverage, but not done enough by buying direct, or get cheap insurance some where.

You can talk until cow come home, and when died, never get yourselves covered properly.

What's the point of writing when every thing Adrian writes is being hammered out of shape.

Let's be objective and not just criticise for criticising sake.

Who cares if you die without insurance?; February 26, 2008 11:46 PM
Anonymous said...: Hey , NATo, you missed the point.
If every one thinks like you and nato
everyone will die under insured. That is the point. Under insured!!!Buying wholelife leads to under insurance. That is why term insurance plugs up this gap left by insurance agents like you . It is people like you who do not care . That is why a lot ppeople die without insurance because they couldn't afford the whorl life to give you unethical insurance agents high commission.; February 27, 2008 11:22 AM