Tan Kin Lian's Blog: Agent fail to explain the upfront charges

Monday, September 14, 2009

Agent fail to explain the upfront charges

Hi Mr Tan
I have a question related to my ILP policy bought from X in late November 2005. My yearly payment is S$1800 with protection of S$80K death and S$100K critical illness. The agent said it is very cheap for the protection but she did not mention the huge charges of 85% for 1st year, 50% for 2nd year and 25% for 3rd year. After 3 years later, then I realize my cash value only left less than 1k. My husband also bought a ILP from her too. May I have your opinion that should I continue these policies.

REPLY
You have already incurred the upfront charge. So, it is better to carry on the policy, as the charges from now onwards is relatively modest. But you can lodge a complaint to X against the conduct of the agent in failing to tell you the relevant facts.

8 comments:

Tan Kin Lian said...: It is very sad to see a customer lose 180% of the annual premium of $1,800 to the agent and the insurance company. The loss is more than $3,000. Is the service or advice of the agent worth so much, or is it cheating the unsuspecting customers?

How many insurance customers have been "cheated" in this way? They are sold a ILP policy without proper disclosure about the cost of the policy.; September 14, 2009 9:10 PM
Tan Kin Lian said...: The insurance company and the agent do not consider that they are "cheating" the customer. They think that it is the customer's fault for not reading the product disclosure. So, they can get away with more than $3,000 in charges. This is the standard of business conduct nowadays. It is shameful that MAS tolerate this type of practice.; September 14, 2009 9:13 PM
gerimegaly said...: Perhaps you might want to re-evaluate your original intent in buying this Regular Premium ILP 3 yrs ago...

Step One: If it was strictly for Investment, then you might want to consider lowering your sum insured from now onwards - Don't forget that your costs/premium for the insurance protection portion gets higher every single year, thus "eating" into your investment portion of your premiums paid every year into the plan

Step Two: If it was dual purpose, ie. Investment & Protection, then consider looking into another stand alone protection/term plan, after taking Step One above.

Do note that before even considering lowering your existing coverage, it would be best if there has not been any change in your health...; September 14, 2009 9:47 PM
Anonymous said...: This product is a regular ILP and is also known as variable or flexible whole life. It is different from the traditional wholelife in that the sum or protection value is decided by you subject to a cap. If you choose high coverage and do not adjust along the way a BOMB awaits you at your old age.
Your low cash value is because you have chosen high coverage and is CHIEFLY due to high commission. You pay almost 26 months of your premium to pay everybody except yourself.
This product is better than the traditional whole life but is also a rip off like WL and endwoment.
Since you have already paid the 'extortion money' you should get higher return from now than the traditional wholelife provided you adjust your coverage as you go along.
If the agent didn't explain and disclose to you at the outset you can lodge a complaint to the company P and copy to MAS.
MAS should regulate the agents and make them do need analysis. Remove the commission too and I bet all agents will stop pushing wholeife or this regular ILP.; September 14, 2009 9:48 PM
gerimegaly said...: Unfortunately, Anonymous is incorrect to say that ILPs are "better" then WL or Endowment Plans.

Your Cash Values in ILP plans are NOT Guaranteed at all. In other words, they will fluatuate, according to the price of the fund. That means whatever cash values reflected at the peak of a Bull Market, can simply be wiped out to reflect a lower value, when the markets start tumbling down in a Bear market. On top of that, the Sum Insured paid out in the event of a claim, is usually the Basic Sum Insured (no bonuses accrued), or the Value of your total units, whichever is higher...

However, for Whole Life or Endowment Plans, once a Bonus is declared, it is GUARANTEED AND added to your Basic Sum Insured. This means that your Sum Insured at inception, grows over the years, and the longer the policy is intact, and the Cash Value is adjusted Every Year, to show a "minimum guaranteed value" accrued to it - This is regardless of how the stock markets perform...; September 14, 2009 10:19 PM
Zhummmeng said...: Sorry, regular ILPs are still better than traditional WL. If you replicate the sum assured of the whole life and their portfolio you get higher return in good time, in full and the gain can be used to 'smoothen' in bad time and you still get better than the bonus given in WL. Although not guaranteed the gain has a good buffer against crash in bad time and also because if it is a conservative portfolio like the traditional wholelife it can even withstand the down turn but I advise client to take more aggressive portfolio to build even thicker buffer.EG. If you have built a 10% annualised before last quarter of 2008 you could afford to lose 30% and your return still stands at 7% at the beginning of 2009.Of course it is now at 8+%.Can WL or endowment give such return?
A regular ILP is less risky over time than a traditional WL because the return is higher than the below inflation lack luster return of WL.
Traditional endowment is the worse becuase this supposedly saving plan is also dumped with the WL portfolio. Endowment gives 'higher' than WL because more premium is invested in the same portfolio.
Crashing ? it depends on the portfolio as explained above.
Your sum assured does NOT grow. This is a misrepresentation by insurance agents and cheating by insurance companies.. Please take a magnifying glass and examine the details. The 'growth' appears only but it is NOT. I just let you have a clue.This has been for years being misrepresented.This is a trade secret which I use it to show agents lie to customers and to point out their incompetence.
Remember this saying. Anything that is gauranteed it is gauranteed to be low.Insurers are not dumb. With the RBC to comply with insurers keep the annual bonus as low as possible so that they need not cut in bad time.
Do you know why TMAsia life never cut bonus? This is something they boast but it can't fool many.
Do you know Equitable Life at one stage of its history had no annual bonus? Of course E LIfe went bust.
Anyway, regular ILPs , WL, endowment, anticipated endowment with dubious cashbacks are as good as rip off scam products.
Universal life or variable universal WL are now being introduced but I won't condemned them because only the rich are conned.Let them be conned. It is ok with me. They can afford.; September 14, 2009 11:48 PM
gerimegaly said...: It's rather interesting that in the same breath, you would "advise client to take more aggressive portfolio to build even thicker buffer", and yet say that "regular ILPs....are as good as rip off scam products"; September 15, 2009 12:35 AM
Zhummmeng said...: I am comparing 2 evils and the lesser evil is regular ILP.
Regular ILPs give 'better'(comparative) return than traditional WL because the owner has better control over the sum assured and in the investment portfolio which can be chosen to suit his or her needs and NOT dumped into the same pot with the others like WL.
These ILPs are rip off because a large amount of money is siphoned off the customers leaving nothing in the first few years and later little to invest unlike a real RSP ILP where almost 100% is invested from the start.
This boils down to the agent. Is the agent for himself or herself or the client? This will determine the product recommendation. Unfortunately, the agent chooses to enrich himself with these rip off products.; September 15, 2009 8:44 AM