Tan Kin Lian's Blog: Difference of 20% in Term Insurance premium

Friday, October 02, 2009

Difference of 20% in Term Insurance premium

Hi Mr. Tan,
I got 2 different quotations for 30-year level term insurance covering death, terminal illness, and total permanent disability, sum assured S$400k.

Company X: S$752/year
Company Y: S$628/year

I asked the agent why Company Y is 20% more expensive. She said that it is easier to make claims under Company X. Is this true? Is it worthwhile paying the higher premium to make easier claims?

REPLY:
Do not believe the agent from Company X. Do not pay 20% more. The claim process should be the same.

11 comments:

Anonymous said...: Hi Mr. Tan,

I noticed lately insurance companies are coming out with new products that claims that we can leave a "LEGACY" behind for future generations.Are such product worth considering? Printed on the brochure claims that for a premium of around $42,000, the payout under 3 generation can reach up to $270,000.

Good deal?; October 02, 2009 8:59 AM
Tan Kin Lian said...: Hi
Send some examples for me to take a look.; October 02, 2009 9:04 AM
Anonymous said...: The company that sells the more expensive term insurance gives away more than 150% commission to the agent over 6 years.
So you see how insurance agents lie to cover up the greed. All insurance agents are liars, greedy and incompetent and would stoop to anything.
Please think thrice before agreeing to anything.
Remember you have 14 day freelook to cancel. Even you have taken up seek another opinion to review.
Use FISCA for review immedialtely if you suspect that you have been short changed or not sure about the product.; October 02, 2009 9:21 AM
Vincent Sear said...: 1. I think that the only reason why a client should be willing to pay more for a same term life coverage is perhaps more trust in the company and agent. However, I personally wouldn't find an agent claiming "faster claim process" as likely to be trustworthy.

2. Insurance companies have problems sustaining and honoring 20 years or so of benefit illustration. Some even have problems keeping themselves liquid. Most of us also have problems taking care of ourselves till old age and/or our children till working adulthood. 3 generations of payouts? If one is so rich as to think of taking care of the next 3 generations or beyond, the financial vehicle to use should be the estate trust.; October 02, 2009 10:20 AM
Lion Investor said...: An insurance contract is essentially a contract of promise. Different parties will charge different rates for that promise.

The consumer is always free to choose which insurer he wants to go with.

Some people do not want the hassle to go around comparing and don't mind paying a bit more to buy from their friend. That is their prerogative.

Some others have a limited budget and would like to stretch their dollar. They should source around for the cheapest and most suitable product for their needs.

Price differentiation will also exists. For eg, Coke-cola bought from a coffee-shop, a cinema and a hotel would cost differently but yet they are essentially the same product.; October 02, 2009 11:32 AM
gerimegaly said...: As in ANY product sold, there will always be price differentiation between similar products. It all boils down to how the company manages their costs, ie. marketing (branding), commissions, staff salaries, etc...to determine the eventual selling price.; October 02, 2009 12:10 PM
Vincent Sear said...: Yes, I agree with Lion Investor. It's not about absolute price competition. Otherwise there'd be only one left standing, i.e. the cheapest one. Even then, it'd not be left standing for long, either it bankrupts itself in the price war or become a monopoly monster.

There're value-adds in sales, marketing, after-sales servicing etc. If being cheapeast wins it all, all these departments are redundant.; October 02, 2009 12:17 PM
Anonymous said...: It is an imperfect market and therefore insurance agents can exploit the difference. On top of it agents normally don't disclose and only half truth is given to the consumers.The FAA is blatantly breached.; October 02, 2009 12:23 PM
Anonymous said...: The price differential should be marginal. Marketing doesn't add value but cost. Remember life insurance is a direct selling business. Marketing should not be used to promote dubious claims of superiority and efficacy.
Did you know there is a company which pays their agents more than 150% over 6 years for term insurance, their first year com is 60%? Is this term product any superior than others?
If consumers are aware that this is the most expensive in town will they buy? Why is it that agents can still sell it?
Recently, it was brought to attention to this blog that the agents were giving away 1 year premium as rebate.The ruse was to trap the customers into signing up and lock them up henceforth.This is a ruse.Isn't it a marketing ploy?
Below are the reasons why consumers kenna conned always.
1.99.99% of customers are trusting. They trust their agents and the company.
2.The market is imperfect
3.The consumers are idiots and clueless about insurance. There are very few savvy ones. Those consumers who think they can compare don't know that they don't know much and end up as fools.
4. The agents lie and tell half truths and exploit the consumers' trust
5.The agents have NO intention of putting the clients' interest first and will use whatever means to make the sale.
6. Agents choose to join company that pays well and products with high commission.
7.Worse, the consumers don't speak up when fleeced. Too embarrassing and they think the amount lost is too small to warrant complaint.
8.because the agents are salesmen and women peddling products no difference from snake oil products salesmen.They are not the financial doctors MAS wants you to beleive.They are a bunch of mdrt , cot and tot agents who are recognised for their super duper skills as dupers.
I just hope FISCA will change it all and give a voice to aggrieved consumers and the boldness to bring rogue and errant and incompetent agents to justice.This will the defining moment for the industry.; October 02, 2009 1:07 PM
Anonymous said...: Mr. Tan

The product link
http://www.lifeisgreat.com.sg/en/jsp/products/products/protection/family3.jsp

http://www.lifeisgreat.com.sg/en/jsp/pdf/brochure_pdf/Family3.pdf

thanks; October 02, 2009 1:54 PM
Sim said...: I am familiar with that product and I must say I wasn't impressed with it during the product launch. It is similar to buying a whole life policy except now instead of just your life, the money is only claimed after your next generation passes on.

The payout you get is across decades. Do consider thoroughly before committing the money for the next 100 years. Don't focus too much on the payout, and if you really really want your grandchildren to remember your name... maybe =D But don't forget, inflation across 100 years is no joke, not sure how much the SA will be worth to them :); October 03, 2009 11:53 PM