Hi Mr. Tan,
Being a fresh grad (with loans to bear), it is really not easy for me to part with the $2000 premium paid so far. Your kind advice has made me reconsider my choice. How did you arrive at the net yield/gross yield? I tried to calculate it but could not get it right. I just want to understand the logic behind and fully convince myself to give up this plan, $2000 and possibly my friendship with that agent friend.
REPLY
The yield is calculated using a financial calculator. Some of your colleagues have this calculator and will be able to show you how the yield is calculated.
Please help to pass the message to your other friends. Their priority is to pay off the loan and not to waste money on a life insurance policy that takes away so much savings to pay commission to the agent.
If you need life insurance protection, you should buy a decreasing term insurance, as explained in this FAQ:
http://www.tankinlian.com/faq/savings.html
They used to advise that you never buy from friends, relatives, and siblings too.
ReplyDeleteWhy? you trust them they will not "cheat" you. So you don't question them, interrogate them, grill them but leave them to do anything for you. Assume they are honest, sincere and they will try their best for you.
But the one important necessary requirement is COMPETENCE.
In your case, your friend had no intention of spoiling your investment but he was definitely, honestly and sincerely wrong and incompetent.In your case it may be a small matter . In other cases sincerity and trust have landed a lot of people in big trouble.
Remember sincerity and trust are not enough . You have to engage one with competence.
Generally speaking, 80% of the insurance agents or salesmen are not competent.
Alternatively, you can consider asking your friend to give you the term insurance or decreasing term insurance - if you feel that this is the right solution for you.
ReplyDeleteMost items sold in the world are not sold to you at cost. There is commission to be made or else how do you think the companies can report profits and why shareholders would continue to hold on to their stocks.
We are paying 100% or even 500% more than the cost price for even the basic items. Look at the canned drinks, like Coca Cola, for instance - the cost price is less than SGD 20cts. It would be naive to think that you can buy things at cost price - the shop will close down. Put yourself in the shoes of a business owner and you know you have to mark up the product from the cost price, which includes expenses and bills to be paid.
Even Mr. Tan's company would not be selling at cost price because the company needs to pay its staff and every year, they would have to increase staff salaries and pay bonuses for good performances and not forgetting their office rentals.
From my own practice experience, when you run a ompany/organisation, there are 3 simple rules to follow: 1st rule is to be profitable. 2nd rule is to never lose money. 3rd rule is to remember rule 1 and 2. You must be profitable each and every year to ensure long term survival and obligation to your customers.
Putting all these in perspective would give you a more balanced view of things.
R.
Your friend didn't mean to screw you up with a such plan. In the first place your friend didn't understand the mechanism of the product ; ie had not enough product knowledge. Many are like him or her, armed with a few features and benefits they go out there to push the product.For these people the products are ends in themselves. The products are supposed to be solutions to your problem or goals but for these people they are quick ways to earn good money, high commission.
ReplyDeleteIn my opinion your friend isn't a qualified adviser and many are like him or her out there , not willfully, to screw up people's financial life. Hope MAS will step in to stop all these incompetent agents from practising, they are not fit and proper.
to anonymous @1:28 pm:
ReplyDeletei heard a lot of that kind of excuses. unlike coca cola, insurance is not a competitive market. it is impossibly hard for any casual consumer to tell between cheap and expensive insurance product. being profitable is one thing, but taking advantage of this customer ignorance is another.
that said, in my opinion, any attempt to fix this market problem should come from the authority, otherwise it will be futile. mr tan's new company might be able to offer competitive products for a few years. but there's no guarantee it will continue that way, just look how mr tan's previous company are doing now. from insurers' perspective there's really no point why they should be competing on prices. from business perspective: why should we be competing on prices when our customers cannot tell our prices? it is pointless.
To priyadi:
ReplyDeleteyou are right that being profitable is one thing, and taking advantage of this customer ignorance is wrong.
But how sure are you that his friend is taking advantage of his ignorance? you have only heard one side of the story. In the context of the fresh grad's case, is it possible that his friend may be inadequate in product knowledge? Most newbies in any business make mistakes. For all you know, the agent friend probably gave what our fresh grad wanted - a lifetime "saving plan" with protection.
since we don't have the agent's side of the story, one way is to focus on rectifying the situation, instead of blaming the himself or the agent friend or the company or society. Notice he mentioned "give up this plan", he did not mention "buy a term plan".
So assuming he really wanted financial protection, one alternative approach (instead of severing all ties with the agent) is to take the corrective action without compromising on, hopefully, what he wanted, a good financial protection without any "returns". At the same time, in letting him know that even buying term plans, the company and agent will still have to earn a reasonable margin to keep them in the business for the long run.
Sometime when a person felt "cheated" once, they will distrust everyone and by the time they realised they should get something, it may be too late or they are not as healthy as they were when they were younger.
About your point on competition, I believe healthy competition spurs productivity and innovation and hopefully, with the appropriate regulations in place, add value to the consumer.
R.
The standard of practice and advise is deplorable.The bar must be raised, currently too low. I wonder where MAS has gotten its advice from? From the sellers of products? The sellers like insurance companies or banks they prefer low standard becuase then they can easily find a lot of incompetent agents to peddle the products, right way or wrong way it doesn't matter, so long there is sale.That is what is happening now.
ReplyDeleteWhen more agents qualify for mdrt, tot, cot it means more consumers are rip off and fleeced. It is a fact. The industry insiders can tell you what their colleagues did to get there but the companies close two eyes. The companies are happy. It means more sales and not more people are helped.