Tan Kin Lian's Blog: Whole life and endowment with low rates of commission

Friday, August 14, 2009

Whole life and endowment with low rates of commission

Someone asked me why I am against whole life and endowment plans, and why I offered these plans during my tenure as CEO of NTUC Income.

I have covered these issues on several occasions in my blog during the past two years. I shall repeat what I have said earlier.

I do not like life insurance plans that have these features:

a) Pays high rate of commission
b) Pays a low rate of bonus (i.e. less that what has been earned)
c) Gives a poor return

During my tenure as CEO of NTUC Income, the whole life and endowment plans had the following features:

a) Pays a modest rate of commission (i.e. about half of the market rate)
b) Pays a high rate of bonus
c) Gives a fairly attractive return, i.e. more than 5% p.a for policies taken in the earlier yeras.

During the last three years of my tenure, I encouraged the agents to sell term insurance and to sell an investment linked plan with low rates of commission (i.e. 15% for 3 years only).

After I left, the marketing strategy has changed.

Tan Kin Lian

9 comments:

Anonymous said...: The people who ask these questions are agents who sell life insurance policies and earned more than 100% in commission. They like the money but do not care about the poor customers who they conned to buy these rubbish products. At least, Mr Tan is fair in giving good value products during his time.

The new CEO is making NTUC like the Pru that he used to run before. Do not trust NTUC now.; August 14, 2009 10:29 AM
Anonymous said...: Not only greedy but they are using Mr. TanKL's good track record as if it is they who achieved the return. Shamelessly, they will do anything, stoop so low to rob their own policyholders of their money with these rubbish products that CANNOT give the return they advertised and yet they dared to imply and misrepresent.. MAS must act on insurers which misrepresent and haul up agents who mis-sell.The total commission is about 150% of the premium paid by policyholders, so lucrative they only sell wholelife products. and their cashback anticipated endowment. Some more dsepicable agents are packaging them as buy one get one free so that they can earn 2 commissions and the customers don't get any enhancement of benefits but 2 burdens interlocked. The company is going to the dogs.; August 14, 2009 10:57 AM
Anonymous said...: I heard the new mangement team is almost pru. The latest to leave is the chief investemnt officer who managed the inhouse funds. I wonder what would happen to the funds? Under his leadership these funds were doing well better than those managed by external managers.
I am watching and I will withdraw the moment there is sign of incompetence and active managemnt. Active management will screw up the funds. Don't try to be too smart. You NEVER beat the benchmark.; August 14, 2009 1:10 PM
Anonymous said...: Use the orphaned money to buy more 2 thousand dollar chairs. Wine and ine at posh places , more incentive trips,; August 14, 2009 2:05 PM
Anonymous said...: Now i will just treat NTUC as another commercial institution that trying to "con" our hard earn maoney.

I think the most hurt one is Mr Tan KL who spent most of his life time "bought" up the "child" but now seeing the "child" go around "conning and hurting" others but is "helpless"..... Can I innocently ask if we can vote him back to NTUC to bring the "heart" of NTUC back to us....; August 15, 2009 1:20 AM
Unknown said...: Hi Mr Tan, as i read through most of your blog, it is commendable that as a EX-CEO of NTUC, you acted as a whistle-blower to the greedy act of the F1 industry. I always wanted to calculate the interest rate return of invesment-linked plans or Whole Life policy, but it is next to impossible.

Some of us complained why FI industry pay are among the highest, i think all of us are responsible to contribute to it, as we are buying investment plans that contribute to RM's big fat pay check. Buying investment plans are really misallocation of resources.

Even as a highly educated nation, I think we have below average knowledge of financial understanding. These can even be seen in the increase take up rate of investment linked products lately. Its seemed ALOT of US are not learning still.

I really hope that we can start something (movement) to promote the importance of insurance and safe investing. i was thinking you should conduct PAID seminar with Paid qualified consultants to address basic knowledge of investing, insurance to the public. What the attendees is paying is better than what they will pay when they bought the wrong products. I like the concept that Financial Adviser should be paid for their advice, rather than taking commission. It will be great to see you starting this trend because of your credibility

Edward; August 15, 2009 1:30 AM
KL said...: during the good old days almost all insurers are paying in excess of 5% for their endowments so the ones from NTUC is really nothing to shout about.
advocating term with ILP whilst still carrying the products (that u discourage selling) on the shelf is fine?; August 15, 2009 4:55 AM
Anonymous said...: The good old days are over. The new is based on conmanship, how to decieve consumers that the old 'good rate of return' is still around by wrapping up with layers of rubbish dubious benefits.
Why there is a need to wrap up? Is it to enhance?
Rubbish... the wrappings are meant to hide the rotten core..
You may ask why continue to have this type of products, wholelife and endowment?
The answer is the company and their insurance agents are in cahoot and working hand in glove to cheat their customers. The company wants revenue, more capital to increase the asset and the agents want to earn high commission and willingly cooperate with company to cheat their own trusting customers by dumping the par porducts on them. And every now and then the company will roll out "new product" for the agents to con their customers.
The new products can NEVER be better than the products. These are not technology products. These inusrance products rely on cost and return.
Cost high return affected. Return low product return affected.You can see for yourself. The ceo is paid million dollar salary, the senior managers paid 5 figure salary, the insurance agents want higher commmission and more high commission products.
Who is paying for it?
The suckers, right? And who is the sucker? the consumers, you. Even you know that you are suckers there are more suckers born every second. That is why the insurance agents and the companies are not worried.There bound to be enough suckers in the market to feed them.; August 15, 2009 12:50 PM
Anonymous said...: I was always concerned that the average Singaporean is under-insured. If every Singaporean were to buy a term policy for $200,000 or even $100,000, they would provide for the basic needs of their family if they die prematurely. Yet, many choose to buy whole life or endowment because they want to see a "return" but provide only a small life cover. I believe the average payout for life insurance in Singapore is around $50,000 only. Am I correct?; September 03, 2009 10:43 AM