Someone asked if life insurnce is sold through multi-level, with high commission paid to all the levels. The focus of MLM organisation is to increase the volume of sales by paying high commission to all the levels.
The answer is "yes, in most cases". The total commission paid to all the levels can be as much as 160% of the annual premium, paid over the first three years. If you invest $500 per month in a life insurance policy, the total commission is as much as 160% X 12 X $500 = $9,600. The commission is taken out of your policy and is shared by the agent, agency supervisor and agency manager. This is money that you have to work very hard to earn, and you can lose it so easily and surely, when you buy a life insurance policy.
Most companies pay commission as high as indicated above. Some companies have only one level and pays a lower rate of commission. One company that I know of (which shall be unnamed) used to pay commission at less than half of the market rate, but I am told that this company has now increased its commission and advertising expenses considerably.
I generally advice people not to linvest in any life insurance product (i.e. whole life, endowment, education, investment-linked policy) due to the high charges. They give poor value to the consumer. It is better to invest in a low cost investment fund (i.e. equity, bond or money market fund).
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
If you have bought a high cost life insurance policy, it is usually better to continue the policy, as you have already incurred the upfront expense. But you should NEVER buy any high cost insurance policy in the future.
that company that shall be unnamed, used to be shunned by independent brokers and marketing banks..
ReplyDeleteapparently now, that company is very popular among the greedy sales ppl..
Even for the company which is not operating as MLM the total commissions paid to agents are about 140% of policyholders' premium. It is still a lot and there is another one component cost to the company..Imagine so much goes to the agents and the company how not the protection and return not affected? Despite the saving as cooperative not much is passed to the customers but they go to paying higher salaries, more general and Indian chiefs, intensive marketing which is not necessary when it has a direct selling sales force, free gifts, higher com and incentive trips for agents. Imagine a cooperative losing sight of its social goal and becoming like the rest. It is misleading the public.
ReplyDeleteThat is why the protection and return of whole life is low.It is very diluted. All the products hardly hit 3% return even after 30 years. Miserable, isn't it?
ex policyholder
A good product is usually selling by itself. Those spent heavily in marketing efforts seems to imply how bad the product is.
ReplyDeleteNo wonder some old folks say, "It is just advertisement."
Is that unnamed insurance company helmed by a foreign CEO? If so, then don't say Mr Tan did not warn you all. Few years later if you do not listen to Mr Tan then don't come here to KPKB when you have been burnt.
ReplyDeleteyes, it is operating like ponzi scheme. the bottleneck will come if the incoming cannot keep up with out going.
ReplyDeleteThank you both for your comments! I appreciate them!
ReplyDelete