Tan Kin Lian's Blog: Good and bad insurance products

Tuesday, September 30, 2008

Good and bad insurance products

www.theonlinecitizen.com
http://theonlinecitizen.com/2008/09/protecting-the-small-investors/#comment-22959

65)--> question on September 30th, 2008 12.57 am
there is one thing i am very curious about mr tan kin lian. you are the ceo of insurance company for many years and yet now you warn people about bad insurance. it really something special or different. will those people in insurance hate you very much. because it is something like last time you are on same boat with them now you are against them. something like betrayal.\\\\\

REPLY
There are good insurance products and bad insurance products.

A good insurance product offers protection at a fair premium. There is a fair margin to pay the sales person, cover the expenses of the insurance company and give a fair profit margin.

There are bad insurance products that over-charge the customer and pay excessive commission to the sales person and make excessive profit for the insurance company.

I want to encourage insurance companies to sell good products that are fair to customers.

I also want to encourage the banks to sell good financial products. The structured products are bad products because they give poor value to the customers in relation to the risk. The product creators and sales people take away too much in charges, and leave the investors to take big risks (like the minibonds, high notes, etc). These products are like high cost insurance policies, but many times worse.

I hope that more people will come forward and speak about business ethics. Business should not cheat customers to make profits. They should give fair value to customers.

More people should also tell the regulator and the Government - look after the interest of ordinary people, the retirees, uncles and aunties and also the young people. Do not allow these ordinary people to be cheated out of their hard earned savings.

7 comments:

Anonymous said...: I have a proposal. In future the products will have a low cost(commission and expenses) and reasonable profit margin for the company.
Commission will range between 5-10%
Example
1. whole life and endowment products
will pay 10% for 1st year and 5% next 2 years.
2.Term products will pay 5% for 2 years.
3.Other products 5% for 1 year.
The commissions above are to be paid to agents who sell and push products and do nothing but soliciting and form filling.
Those who are qualified and competent and who can prove professional competence in specific area to provide financial planning advice can charge a NEGOTIABLE FEE (hourly or piece rate)with customers.
This will keep the cost low for the consumers and the company. The products can charge low premium for larger coverage and higher return of about 4% after 10 years.
This model will attract those advisers who are serious about helping people to upgrade themselves and to be paid according to service and work done for the customers.
For agents who sell only, they get the commission as in the products.
This will be akin to other professions where fee commensurate with professional advice and work and not for form filling, legwork or solicitation and some other non financial services.
This is the most equitable and agents who think of 'get rich quick' are nor suitable for this trade.This will stop mis-selling and misrepresentation, unethical selling , conflict of interest and malpractices.
This will weed out agents who are in the business just for the money and who not interested in helping the customers. This will elevate the profession .

Fair Dealing; September 30, 2008 8:56 AM
Weng Mao Fa said...: Captain of the boat was Mr Ong Teng Cheong who was not from incubator.; September 30, 2008 10:02 AM
Anonymous said...: Hi Mr Tan,
Before I don't really understand the danger behind Structured Deposit and you already warn in your blog to stay away from Structured Deposit, I now fully understand the risk with the collapse of Lehman Brothers. Thank you. I support your campaign for the fair charges of financial products. The era when banks or insurance company or any finance institution happily charge customer should be over or provide bad advice, but without any lesson learned, it will happen again when the economy recovers. Hope you can do something about this.; September 30, 2008 11:07 AM
Weng Mao Fa said...: 40+ years of nation building, are we in the same boat? Let's look at the history. We had different size of boat with different characteristic of captain to move from port to port.

1. Before independant - Many boats. Many Captains.
2. The young nation sailed by "SAM PANG" (fishing boat in Malay). Captain was a strong "iron man"
3. The boom nation sailed by CARGO SHIP. Captain was a scholar.
4. The nation sailed by RSS (Navy vessel). Captain is the dragon.

PROBLEM:
Some boat men in the "SAM PANG"
or "CARGO SHIP" did not jump boat to the RSS and left behind. The mission of RSS and CARGO SHIP/SAMPANG are different.; September 30, 2008 11:23 AM
Anonymous said...: Why some "good" products are not available for retail buyers,
but "bad" products flood the market.
Very dangerous, can get hurt easily if you are not careful, especially when many people are pushing them.; September 30, 2008 2:37 PM
Anonymous said...: hi mr tan,you are a good man.

i agree with you on the business ethics. just take the example of the recent china milk powder issue, they are the good example of poor business ethics.; September 30, 2008 2:47 PM
Anonymous said...: avoid cashbacks like revosave and prucash , they are scams.
Avoid all wholelife , they are rip off.
Avoid endowment they screw up your retirement.; October 02, 2008 6:16 PM