Tan Kin Lian's Blog: Poor products and unethical sales techniques

Wednesday, March 05, 2008

Poor products and unethical sales techniques

An insurance agent presented an insurance policy for a young person. The agent gave him a standard "policy illustration" comprising of about 10 pages with several hundred figures. The young person was confused. He asked for my advice.

Here is my analysis of the plan:

1. It is an investment-linked plan involving a monthly saving of $100
2. About $2,400 of the insurance premium (about two years of savings) will be taken away to pay commisison and expenses.
3. After 10 years, even if the fund earned 9% (which is unlikely), the cash value is still less than the premiums paid
4. The agent recommended that the premium be invested in the India and Vietnam funds.

I am angry that a respectable insurance company could offer a poor value product to its customers. The insurance agent is unethical in pushing such a product to an unsavvy customer, without disclosing the relevant facts.

The strategy is to confuse the customer with a lot of confusing figures and to train the agent in the "sales technique" to sell this product.

How many customers are being taken for a ride each day, with this type of products? I hope that the Monetary Authority of Singapore will realise the weakness of this type of "product disclosure".

5 comments:

Anonymous said...: To avoid this don't buy from salesmen.They earn commission at your expense. They exploit your ignorance.
They cheat you in broad daylight; March 05, 2008 9:27 AM
Anonymous said...: Hi Mr. Tan

I see your point. The training of the advisor is just as important as the development of the product.

Why don't you write in to the papers or to the CEO of the said company?

As for the "policy illustration", it is a guideline laid down by MAS that the document be shown to the client so that there is no misrepresentation and full disclosure of the costs involved.

Of course, how the advisor describes the document and its contents to the prospect is another matter altogether <- it boils down to the training.

for e.g., i have a 21-yr endowment plan with an respectable insurance company with an annual premium of $610/yr. The yield to maturity is 4.55% p.a. I thought it is pretty good, given the fact that there are no other products available for me to do monthly savings with a similar returns. most investments will require $100/mth commitment, which I can't afford when I picked up the policy 8 years ago.

Cheers

R.; March 05, 2008 3:35 PM
Anonymous said...: This 'P'company and ntuc employ similar sales strategies, product pushing.No disclosure but sell the features of huge coverage and other dubious vague benefits. It is very sales oriented and it was #1 in 2007.
NTUC tried to emulate and chalked impressive production but ended #4. But both companies trailed behind the others in need based and set the infamous record of having the most complaints against them for malpractices.
What good having a lot oc mrdt, tot cot when agents achieved them at the expense of malpractices and at the expense of clients.
MAS is now putting in place a regime of practice to clean up this kind of agents.; March 05, 2008 10:36 PM
Anonymous said...: Talk about being unethical ntuc agents have joined the rank. Now "buy revosave to finance vivolife" is the ruthless battle cry of ntuc agents.
Real ruthless, never before i have seen them so greedy , ruthless, conscienceless pursuing money at the expense of their customers.This is a case of unscrupulous mis-selling.All the roadshows greedy men and women lurking in wait to pounce on the unwary customers. This is indeed a revolution of the new management's theme. Instead of "let a hundred flowers bloom" the revolution is "let a thousand suckers be fleeced by all means".
The cooperative has now become the operative of malpractice.; March 06, 2008 11:13 PM
Anonymous said...: This is expected. Do you know who is the new top man in Income? He was previously the CEO of company P and is the man who brought ILP to Singapore. Slowly and surely, Income will morph to take on his personality.

blackbox; March 07, 2008 8:10 PM