Tuesday, October 13, 2009

Advice from an insurance CEO

I met many senior insurance managers at an Asean Insurance Conference in Vientiane, Laos.

One participant, who is a CEO, told me that he advised his friends and family members to buy Term insurance for the insurance cover. He advised them to avoid insurance products as investments, as they get a poor return.

He wished that it was possible for his company to sell better value products, but after providing for the high commission to the agents, this was not possible. He was not able to develop a new sales channel to replace the agents.
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4 comments:

zhummmeng said...

It is like hearing from the horse's mouth and yet many consumers don't heed the advice.
Wholelife , endowment and regular ILPs are rip off and condemn you to low protection and saving.

October 13, 2009 9:47 AM
wjsim said...

Agreed. The day when consumers are educated will be the end of the agency force.

Insurers are caught in dilemma. Either they bring in sales with high marketing and commissions, or lose them with quality value products that no one knows.

October 14, 2009 12:35 AM
Leonard said...

I was introduced by a Prudential agent into a whole life/ILP policy at Maybank (which she was situated at). Well, being a newbie, I did not like the details but rely on her to provide me the overall structure. Instead, she kept mentioning that the returns from the policy will pay for its premium after the 3rd year. And she mentioned, with a very quick and succinct manner that we had to continue to pay the premium of $5,000 every year, in order for the returns to pay for the premiums. Which our minds did not capture, but she got us to re-focus on the self-paying aspects of premiums very quickly. I admitted, it was my negligence in not taking heed of that subtle disclaimer, that I need to swallow the entire loss when I surrender after 3 years and switch to a term insurance.

Yes, the premium was $5000 per year. And I signed it during my NS years. So foolish was I. She was covered by the signing of the Financial Profile Form that MAS mandated all agents to let their clients sign before taking on any policy. I understand that the purpose is to raise awareness but if folks like us are not even sure of the outline of what an insurance policy is, how else could we even see through what she directed our attention too. It is absolutely like a David Copperfield con job, except she understands the safeguards set by MAS and presents her job in a deliberate manner that worked around the safeguards. This is misrepresentation without the interest of the client at heart. What is worst, is that this is perfectly legal, when they know how to navigate the bars that MAS set around them.

The worst thing that I find most agents (housing agents, insurance agents, etc...) in Singapore, is that they work out of their own interest (i.e. eyeing your commission), instead of your interest of seeking a proper protection. That means working without integrity. Having no integrity is worst off than being highly intelligent. This is very destructive to a society as a whole. The relative sophistication of agents is just hovering on how to get big, lucrative deals done around legal barriers.

They should be tested for integrity, similarly to how policemen and public characters are recruited, instead of just pure product knowledge and rules/regulations tests. Of course, at the same time, financial literacy is equally important. But, do not forget why do we engage agents in the first place, we look to them because they have something that we think we might be lacking. And if these agents always pry and capitalize on our weakness, where is progress as a general whole? At the same time, with all the tests laid by MAS, agents, instead, should be the frontline educators and ambassadors of financial products, instead of being disguised as a "financial consultant", where behind the curtains they are being dangled with commission carrots by the firms they represent. Isn't it ironic?

On the other hand, we have individual activists and supporters of term insurance. The voice, though soft compared to the collective whole of the commission-grubbing agents, is true and clear. It represents our interest at heart, given the current economy with a 4-7% inflation rate coupled with near zero savings rate. TKL and friends, the truth, may seem small but it will eventually triumph over the fog of lies. Like the recently passed Deepavali or Diwali. Light represented the truth, though small in size, but eventually this flame could be passed on to many other lamps, and together, it is shining as bright as daylight, leaving darkness behind.

Pardon my cynicism, but I would love to see Singapore grow as a collective whole, instead of being ripped off by our own countrymen. Please stop this massacre of ethics.

Disclaimer: This entire input is a private opinion of mine. I am not responsible for any thing that is associated with utilizing this input. It does not represent any thing else. If this entire input is quoted, inclusion of this disclaimer is compulsory. Your cooperation is appreciated.

October 23, 2009 11:12 AM
Leonard said...

Hi TKL, could you add in this paragraph after "Isn't it ironic?"

"One main reason why you should keep the recurring costs/overheads as low as possible? Which incidentally includes taking on term insurance. Like what Suze Orman on CNBC advocates time and again, you should separate savings from insurance. Because savings, is linked to income generating activities, which is not constant forever. There will be definitely ups and downs like the tides. So, if you are bound to a so-called RSP or ILP which you pay others to administer discipline to set aside money and which using the same hand, punish you by penalizing on the savings when you stop or reduce your so-called savings into the pot, you do not have the adequate flexibility and liquidity to meet your other needs, which might include putting these savings into a higher yielding instrument or save your aunt by paying for her cancer treatment.

Dear all, please do not fall into an idealized so-called Benefits Illustration where they hold both inflation and your savings rate constant. Just remember, when times are bad, every cent you saved or have on hand goes a long way. Do not have these truths be imprisoned in a process which you are misdirected into and later regretted signing on. Like Sun Tzu's Art of War, in times of good, prepare for the worst. In times of bad, prepare for the best. Mr Sun did not mention handing over your preparation to a so-called professional, as you know your abilities best and also question yourself on why are these agents smiling at you. Are they smiling because they are satisfied that they could help you with your financial needs or smiling broadly because your gullibility to pass them their commission."

Many thanks again, TKL and take care.

October 23, 2009 11:31 AM

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