Tan Kin Lian's Blog: Insurance agents can play a positive role

Monday, October 05, 2009

Insurance agents can play a positive role

I wish to say a few positive words about insurance agents; I know many of them personally over the past years. They sincerely believe in providing a valuable service to protect the financial security of their clients. They work hard to make a living and earned a modest income.

The commission rates earned by the agents of NTUC Income are lower than the market rates. This helped to reduce the cost to the consumers. This was the case in past years; I believe that it is still the case today.

Some people have regulary posted anonymous comments to attack insurance agents, particularly the agents of NTUC Income. These comments were unfair and malicious; I have blocked them.

While most insurance agents act honestly, there are some agents that take advantage of the ignorance of their clients. These bad agents resort to twisting and gave bad advice to earn more commission. They are the minority, but they gave a bad name to the other agents. The insurance companies have to share the blame for the bad practices also.

Insurance companies can play a positive role by designing products that are fair and give good value to consumers, while providing a fair of remuneration to the agents. The correct approach is to simplify the product, improve transparency, increase the productivity of agents and reduce the distribution cost. This will create a positive environment and benefit all the parties.

Tan Kin Lian

30 comments:

Anonymous said...: Dear Mr Tan,

Not all agents of NTUC Income are sincere about protecting the financial security of clients. I have also not found one agent who are truly impartial in their recommendation. Most would try to push unnecessary products to you if they find that you are not knowledgeable about insurance.

I was sold a $6000 annual premium life policy by one of NTUC top agents during your time at NTUC. The monthly premium is equivalent to 20% of my take home pay. The value of the life insurance is only $200K. I was stupid and ignorant. i was only apprehensive of buying such an expensive policy.

I terminated the policy after my wife got retrenched and I had to quit my job because of stress.

There was no financial planning by NTUC's so called top agent. There was no mention of what was in the policy to make it so expensive. I was also ignorant of what to buy from the insurance industry.

Can you advise me how much commission(an estimate would do) did I lost when I terminated that policy?

It still pains me to buy that insurance. Well I guess it's part of the growing up process in Singapore "to be sold unnecessary products". As far as I know, Insurance agents are targeting the next generation of young Singaporeans to be sold unnecessary products.

If you show that you are aware of insurance products and their uses, insurance agents would not come back to you because they rather look for easier targets(ignorant young people).

I am aware of their tactics but until MAS steps in to further regulate the industry, we will have many complaints against insurance agents. Apologise for painting such a negative picture of insurance agents.

By the way, I have not seen any of the insurance agents who sold me other types of insurancefor the past few years probably because they know I am not an easy target anymore.; October 05, 2009 10:51 AM
Anonymous said...: Agents from NTUC disappear from my radar screen once I signed up for a policy, and I don't haer from them ever again. Also I am not happy they wrote me a leeter urging me to convert my critical illness (bought eighteen years ago) policy into an annuity plan.

At least my agent from Great Eastern sent me birthday greetings over the internet. I don't even receive the usual birthday card, maybe they have stopped this practice now. NTUC has become faceless now.; October 05, 2009 2:38 PM
Tan Kin Lian said...: Hi Anon 10:51 AM
There were black sheeps among the agents in NTUC Income during my time as well. I had to terminate one top agent for malpractice, after he compensated the clients for their losses. He joined another insurance later.; October 05, 2009 3:15 PM
Anonymous said...: I was flabbergasted last month when my insurance agent who had not contacted me for more than 10 years, posted my comprehensive policy details to me. I asked my friend of more than 20 years experience and in senior position in insurance industry whether there was a breach of confidentiality since at no time had he contacted me for permission to download and access my details. She agreed with me that this is a breach of confidentiality. I intend to write to insurance co. to ask if their agents freely access and download clients' policy details without first checking with the client. I think such practice should stop immediately.; October 05, 2009 5:08 PM
Anonymous said...: Dear Mr Tan,

From Anon 10.51AM,

Looking at the bigger picture, I understand the government's reluctance in regulating the insurance industry, the property agent industry, the banking industry and all the Minibond fiasco.

By regulating these industries, unemployment would rise further. The insurance and property industry does not require qualifications or require minimal qualifications to enter into. It employs lots of fairly educated and the less educated people.

The banking industry on the other hand employs lots of graduates. But without new financial products for them to sell, there will be no jobs for them. You can understand the government's reluctance to rein in the complicated financial products.

Therefore I heed the saying "caveat emptor", Let the buyer beware. I was almost caught by the minibonds scandal.

I was asking myself where in Singapore is there a 5% fixed interest rate return? I could feel there was something amiss but I couldn't figure it out. I could understand the product brochure but in the end I realised it was misleading.

Please bear in mind that I am well versed with a lot of financial products yet I could not figure out the actual process behind the financial products. Fortunately for me, my scepticism prevail.; October 05, 2009 5:14 PM
Vincent Sear said...: It's not completely true. The real estate industry doesn't require any qualification, that's true, but the insurance industry requires a whole series of qualifications, ranging from life, health, general, investment-linked etc. However, after passing the required exams for the required certs, the regulators are quite hands-off except issuing some directives here and there, now and then. Whether complied with or not, it's like wait and see how. Technical knowledge can be regulated and verified with examinations and certifications. Unfortunately, honesty, integrity, sincerity and service attitude cannot be.; October 05, 2009 6:32 PM
Anonymous said...: Anon. 5:08PM,
your agents is trying to impress you with your policy summary in the hope that she can sell something to you. To her this is review and not knowing she breached confidentiality.
You should lodge a complaint with the company and maybe copy to MAS.
I can see she is a crap and not professional. You can see she has ulterior motive.; October 05, 2009 7:10 PM
Queen Bee said...: Since 1992,I have learnt to pose insurance agents this scenario:
" I have only $100 to spare every month.Sometimes less. What policy can I buy that will give me protection and at the same time earn some profit?"

As soon as the agent appears lost or requires time to consider, I say to them: go back and learn about your products.

If they offer me policies that require more money, I say to them:
No, thanks. Please go away.

Over a period of 8-15 years, 8 agents representing various companies failed to convince me. I allowed them into my home. I allowed them my time. Yet, they were very shallow and poorly equipped to sell. Some were my friends and co-workers trying to sell insurance as a sideline.
They all failed. Projections of 8% returns did not stir me, in fact they were unable to explain how a return of 8% was possible, except that it was merely a projection.

Too bad, an occupation that could have integrity and honour fell into such despicable repute.

May they all go to heaven.; October 05, 2009 9:22 PM
Anonymous said...: To Anon 10:51,

You mentioned that you bought a whole life policy during Mr.Tan's time for $500/month, which is 20% of your pay.

Mr. Tan has often mentioned that during his time, the products under his care gives good returns and his agents earn less than the indusry.

So it puzzles me, why did you terminate it? Perhaps with a little patience and you will see the good returns from the products under Mr. Tan's tenure as CEO.

It may be a good thing if you had kept the policy. When you quit your job, the cash value would have sustained the policy and you have some protection when you are out of job. If it had been a term policy, once you quit paying, you quit being covered.; October 05, 2009 11:17 PM
Khiat Han Hwee Adrian said...: Hi Mr Tan,

I'd followed your blog since day 1 you started it. I generally agreed with most of your postings though with differing opinions at times.

However, as a follower, I sometimes get very demoralised and negative towards this industry. I begin to feel that Financial Advisory is a sunset industry.

Although I'm not in a negative cashflow position currently, I'm worried about my future when I have children and my expenses increases. Will my pay increase or decrease years down the road when the industry seems to be so cost-saving driven.

I belives in term insurance for maximum coverage and to create investment discipline for my clients. To sustain under such low cost structure, I have to work extra hard to find more clients. Many of them do not understand that I do not earn much and still expect very precise services which I find it hard to catch up. I ended up working very long hours to earn the same income which as a result caused a strain towards my family life.

For an advisory fee structure, it have to be an industry effort and its hard to lower the fee to as low as $100 or $200 per client to be sustainable. Its also very hard for a financial advisor to charge as much as $500 or $1,000 per client and able to find such clients consistently.

Is there really a future for us? When we show people a low cost strategy, they will expect lower to a point we can earn nothing or peanuts. It became more depressing when they still accused us of being unethical and dishonest for not telling them a way whereby they don't need to pay us a single cent.

If you talk about minimum wages for some industry, will this happens to ours where we also deserve a minimum wage for the time we spent?; October 06, 2009 12:44 AM
Insurance Licensing said...: I totally agree with you but the insurance industry is so fast paced that it's hard to keep up with. If you look around there are so many examples of successful insurance agents who've made it big by giving value to their customers and providing excellent service to the clients. We need more of those guys to change this industry as one of us can go on to build something that is more transparent and beneficial to both the consumer and agents.; October 06, 2009 1:18 AM
Tan Kin Lian said...: Adrian, if you are interested to give financial advice for $100 or $200 per client, there will be many people who will use your services. I suggest that you join FISCA, and provide this service to FISCA members for a fee.

The members will be told about the standard of service and the code of practice - which will protect both the members and the adviser.

I also call on other financial advisers interested in this practice to register with FISCA also.; October 06, 2009 3:27 AM
Anonymous said...: Insurance Licensing,
The so called successful insurance agents who make it big and earned big buck are the biggest malpractitioners. They are successful financially at the expense of their beloved clients. We don't want these guys because they set bad examples and not good for the industry. I know these people. Their wealth is ill gotten.; October 06, 2009 9:05 AM
Anonymous said...: Yes. $100 per client per hour. Thats a reasonable rate for professional services.
Less than a General Practitioner of course. But thats about the same rate as Polytechnic leturers.
After all, you are dispensing strategies and professional advice.
On top of that, if your client likes you and believes in your views, they will buy products and you will get commissions. JUST DO NOT PUSH SO BLOODY HARD ON THAT POINT!!THIS IS WHERE MANY FAIL!!; October 06, 2009 10:05 AM
Anonymous said...: Recently just bought i-term from a NTUC Income insurance agent.

He said he is a salary worker (employee of NTUC Income) who doesn't earn a commission.

Is this true, Mr Tan?; October 06, 2009 11:57 AM
Anonymous said...: To Anon 11.17pm,

To put it simply, I couldn't afford it. With my paltry and very much less than peanuts salary!, I didn't have much savings in the beginning when I was working. What more when I quit?

I read in the newspapers that many people could not afford the life insurance payment, that's why they quit paying.

That top agent in Ntuc says he doesn't sell insurance for less than $6000 annual premium and he only sells life insurance.

I was stupid and just follow along. I should have assess whether was I comfortable in paying so much for a life insurance.

To the young readers, even if you want to buy insurance, you must make sure whether you are comfortable with the monthly payment and not buy bec of persuasion by friends or ego or greed.; October 06, 2009 1:08 PM
Anonymous said...: To Adrian,

I can see your point.

Let me offer my viewpoint. Your only hope is where the government regulates the insurance industry tightly and let honest and competent advisers do their job. Then your cake would be much bigger for you.

The government is more concerned with getting more people employed. Therefore they are unlikely to tightly regulate the insurance or property industry. This is even though there are plans to regulate the real estate agents.

I have not been shown a low cost strategy by any insurance agents, not even one. I have to request term insurance from the agents. Yet they tried to show me something else which is more expensive. I do not mind buying the more expensive plan but please tell me why is it more expensive? In what way is this plan better? Please disclose all and not leave the consumers trying to figure out by themselves. We can sense whether the agent is trustworthy or not.

Most but not all consumers are reasonable people. If the insurance agents act in the best interests of their customer, we will definitely come back to them and provide referrals without being ask by the agents.

The insurance agents have actually broken their own rice bowls by thinking of how to achieve sales and premium targets,how to be the next millionaire, what is the easy sales target. How to scare them into buying this product. Should I employ this psychological trick to make him buy?

They should be thinking in terms of - This is my potential customer. What protection does he need at this point in time? What product is most suitable and cost effective for him? When should I come back to him to cover other gaps in his insurance portfolio?
The consumer can sense whether the agents are sincere in their intentions or not. Hey I can be a good advisor! Ha Ha ha; October 06, 2009 1:47 PM
Anonymous said...: I don't know about those who advocate paying $100/hour. It is too much. Furthermore, should the 100 ~ $200 be paid for advice or knowledge I already knew? What is the point of paying for information that is readily available on the Internet?

I think customer should pay only if they think the advice really benefit them, or else, they are actually wasting their time and they should demand payment from the advisor or just walk out without paying at all for so-so advice.

Mr. Tan's book already give all the advice necessary, and it costs less than $100. So why pay more?; October 06, 2009 3:55 PM
Anonymous said...: I think this kind of consultancy has limited lifespan.

Assuming good advicing was dispensed. One day meet 4 clients, one week 20 (assume 5 working days). You work for 40 weeks, that's 800 people a year per agent.

If there are only just 2,000 agents (across the entire industry) practicing this method, 1,600,000 will be served in 1 year and in 4 years, all Singapore residents would be served.

After that no more business. Because if the agent has done the right thing, then adequate protection using term plans would be implemented and funds need not be monitored since most will be ETF-based and long term view.

I think it is time for Adrian and friends to diversify into property and other streams of income for survival.; October 06, 2009 6:02 PM
Anonymous said...: It is true that the correct approach is to help the clients to put in place a protection plan to take care of all their risk FULLY so that that they have peace of mind. Peace of mind to think of investment, retirement , children education and so forth. The problem is the insurance agents PURPOSELY created the shortfall , the gap with products that CANNOT address the needs of consumers fully. Products like vivolife, revosave or collegeplus, cannot provide full coverage and consumers CANNOT afford to buy them enough, eg . can consumers afford $500K or $800K of these products? No..I said deliberately created shortfall is for the agents to 'review' in the future. What is review to the agents? it means to sell another Wholelife product, to sell another vivolife or revosave or to sell a new product with high commission.
This is utterly rubbish work and ntuc agents printed confidential summary materials is to impress the polcyholders but actually the motive is to sell another product on the pretext of 'review'. What rubbish. What do they know about review?
Insurance agents cannot fool the consumers.
What Adrain is doing is a sacrifice and I hope he will be well rewarded in the future when MAS replaces commission with something else. Adrain, continue to be honest and competent and don't be sucked in by the greed of other insurance agents.; October 06, 2009 7:58 PM
Vincent Sear said...: Anonymous 6:02PM,

It's like saying the medical professsion wouldn't last long. Doctors heal patients who live happily ever after till peaceful passing at ripe old ages.

There'll always be children grown up into adults, new immigrants, changes in circumstances etc.; October 06, 2009 8:28 PM
Insurance Licensing said...: Dear Anonymous, I don't think it would be fair to stereotype these guys. Of course there is a dirty fish in every pond but what I meant by being successful was to live a good life and be able to provide their families with their means of livelihood, not build mansions. These examples live in our circle. It's very easy to cross the line but if an agent remembers that there is a bigger cause and the ethics lessons he/she learnt, things will definitely turn out your way.; October 06, 2009 9:01 PM
Anonymous said...: Vincent Sear,

Two different context altogether.

In the context of medical profession, there are many different types of problems, some can be recurring, like the common flu, cannot be avoided. Nobody wants to get sick. See doctor is "bopian". healthy healthy see what doctor?

In the context of insurance advising, there are only three areas:
money to look after the family when one dies, hospitalisation, and disability.

If the advisor does the job correctly, the above 3 areas can be addressed by simple term plans and medishield-like plans. there is no need to review year after year to see whether enough or not enough. If agent cannot find addressed above concerns within the 1-2 hours, he is lousy agent. I need not pay anything. I can go to any tied agents and they can give me the same answer, for free.

A $600,000 term for a 30 year old cost less than $100/month and that's more than enough for most people. don't tell me every couple of years i need buy to new term plan, that's pushing products.

nowadays birthrate is less than 2, what "children grow up" etc, my friend, we are not living in the era of many children. wait for children to grow up, the agent already gone into other business.

You may get sick many times but you only die once. Next of kin just walk into insurer customer counter and everything settle on the spot. Hospitalisation claims already done by hospital, no need agent. Online claim forms and submission available. Got language problem or policy alteration, ask insurer customer service counter, they can help.

An agent is not a legal professional nor is he an accountant, so please leave the tax and estate stuff to the right people.

As for retirement, everyone knows putting money in ETFs will work for the long term. Once you get the basics right, the rest of the time is just topping up and selling online, you don't need an agent.

Why waste the $100-$200 for the 1 or 2 hours? Get agent to draft it down right the first time and the rest is auto-pilot. If agent thinking in your best interest, then you no need to worry about visiting him again.

That's why this kind of $100/hr industry will not work in singapore - main reasons: population too small, and solutions are generic: term plans, medishield (or similar), ETFs.

Don't try to make a simple subject complex. Think simplicity. Think efficiency.

There are much, more things in life to do than to do your "financial health review". Consumers don't exist to let agents earn a living by charging $100/hour. As reiterated before, tied agents do that for free and no obligation to buy anything from them.

PS: Also, we got Mr. Tan's book and blog, any questions can always post here.; October 07, 2009 4:03 AM
Anonymous said...: Dear Insurance Licensing,

The problem is not a dirty fish in every pond. The problem is too many dirty fish in every pond!

But the problem is the not so smart dirty fish doesn't earn enough with so much competition. The smarter dirty fish is raking big bucks.

Dear Anonymous 4.03am,

I would not go to a tied agent for free advice, if possible bec a free agent can compare products across the board.

I would rather pay the free agents for financial advice provided he is acting in my best interest.

The advise may be free but how do I know whether it's for my best interest. The tied agent may have his own agenda.

There's no free lunch in this world.

Circumstances change, new insurance products may have arrived like Eldershield, You may have been promoted to be Managing Director like Mr Tan Kin Lian was before, You may have hit the toto $10 million dollars jackpot, your thinking may be different. You may then think of buying a $6 million dollar term insurance. HA HA HA HA HA!; October 07, 2009 10:30 AM
Vincent Sear said...: Anonymous 4:07AM,

I agree mostly. Recurring business is hard to come by, but I think that a reasonable volume will come by for those who are good and earned their clients' confidence.

I don't think there's such thing as planning it once and for all autogear and autopilot till death in financial plannning.

Marriage, children born into family, promotion and salary increment, change of career from job to business, receipt of inheritance, divorce, death of parents or spouse, the list goes on. All these are circumstantial changes that require relooking into personal financial planning.; October 07, 2009 2:04 PM
Anonymous said...: Vincent,
insurance agents review not because of the above changes. They already knew the gap and review was an excuse to sell another similar wholelife product. The gap was created in last 'review'.
The usual 'advice' to the clients is "if you can't afford all now wait till you have money to some more".
Who can afford all the needs in wholelife products? The rich may not also be that dumb. Often it is the poor who kenna this. No wonder these poor people are always under insured.; October 07, 2009 7:07 PM
Vincent Sear said...: That's why I agree with T.K.L. looking for a new system. Agents shoudln't be motivated and incentivised to sell for the sake of sales, they should be rewarded for good advice to their clients.; October 07, 2009 8:33 PM
Khiat Han Hwee Adrian said...: The value of a Financial Plan is very subjective. A highly confident and good sales person can convince his client that it is worth $500. A less confident and not so good sales person can probably convince that it is worth $50.

The person who took up a $50 financial plan may demand $500 value of a planner's time.

There is no guideline on how much a plan is worth. Some people may never want to pay as they simply feel that its useless because many things in a Financial Plan are actually commonsense analysis.

What I feel is that the rights and benefits of Financial Planners are not protected. It was disheartening to see that Financial Planners, though plays an important role in the Society to encourage people in taking care of their personal finance, was not being appreciated and bombarded from every corners.

Doctors do not need to spend so much time prospecting and servicing existing clients as people will simply look for them "Immediately" when they are sick. The need is important and urgent.

How many people will feel that they are financially sick and look for a fianncial planner? As personal finance is usually not an urgent task, people may hearsay from colleagues and friends and DIY themselves. They may feel that its not necessary to pay any fee.

I'm in a confused stage and I do not have a clear picture of my own future. But I hope we can think of ways to protect and help the industry by creating a win-win situation for clients and planner, instead of getting daily destructive allegations of advisers being cheats or greedy. It have to be an industry effort and the leadership should comes from MAS.; October 08, 2009 1:14 AM
wjsim said...: Anon403,

$100 dollars is too much? You have no idea how much the commissions are. You are a very good customer, please be my client. I will give you free advise and charge you thousands in commissions over the next 5 years.

Ask any full-time agent whether he wants fee based $200/hr and no commissions or fully commission based remuneration.

As an informed consumer, I will gladly accept the $500 in advisory fees when I know that my premiums are 30% cheaper. Over the long term, consumers stand to save thousands and potentially hundreds of thousands in opportunity costs. But as usual, consumers will complain about what's in front of them.

Simple example. You need health insurance. Agent A sells you at $160p.a. Agent B sells you at $120p.a. SAME COVERAGE. However, you'll have to pay agent B $200 for consultation fees. Who will you purchase from? Few people can see that in 5 years, you'll be paying a lot less for your premiums if you bought from B. This is even more true if you purchase more products instead of just one HI. And of course, Agent B will probably not provide any service after that.

A separate case to illustrate the fickle minded human. Everyone doesn't want inflation. Yet, they want their wages to go up and the price of the things they sell to go up.; October 08, 2009 7:22 AM
zhummmeng said...: Many clueless consumers prefer to pay thousand of dollars in commission and get nothing but filling forms.
For fee based, you get more and pay less or you pay same commission and get more.
Buying from a product pushing insurance agent , he will CONvince you in 30 minutes plus filling up the forms and some promises that he will be there to help you with the claim if it is needed in the future and you are charged by amount of commission embedded in the product.
With a planner he has to investigate, examine, fact find you and analyse and identify the best product or products and solution to help you meet your financial needs.
The first time meeting may focus on discussion and gathering info and identifying goals from the client. The planner will analyse and come up with a report and recommendation and if you accept it will be implemented by the planner or another planner. All this work for a fee or a commission of the product.Is it worth it? If it is from a salesman
you will be SOLD and he gets a commission in half an hour.
I hope you consumers understand and differentiate the planners from the insurance agent salesmen .
The product pushed by the salesmen likely will not meet your needs and meet adequately. That is why today Singaporeans are under insured and unable to retire.; October 08, 2009 8:44 AM

Monday, October 05, 2009

Insurance agents can play a positive role

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