Life insurance products, including whole life, endowment, annuity and investment linked products, are useful to consumers if they are properly designed. They encourage consumers to make voluntary long term savings and manage the risk of premature death, disability or other calamities of life and improve the financial security of the insured families.
These products should be designed to be fair and give good value to consumers, by adopting the following approaches:
a) use the asset share method to distribute the fluctuating investment gains
b) keep distribution cost low
c) make the products transparent and easy to understand
There is also a need for the Government to review the tax incentive to encourage long term savings.
The asset share method is already adopted for the investment-linked products. They can be the platform for the future products.
It is possible to keep distribution cost low by educating the public on the purpose and value of life insurance products and the tax incentives that comes with them. When consumers want to buy insurance products, the sales people can be more productive in selling these products. The commission can be reduced or replaced by a fixed transaction fee.
It is useful for some tax incentive or subsidy to be provided for insurance products. If the interest earned in the life insurance fund pays a lower rate of tax (like in France) or is tax deferred (like in USA), the inherent advantage will make the life insurance products attractive to consumers. Alternatively, the premiums paid on insurance products can be allowed a modest rate of tax relief or subsidy (for people who do not pay tax).
To avoid any abuse of the tax incentive, a system of regulatory control has to be implemented, including meeting of performance indicators on cost, efficiency and benefit to consumers. This cannot be left to "the market". Predatory products that are unfair to consumers or designed to abuse the tax incentive should not be approved.
Singapore can learn from the positive experience of many countries in using tax incentives to develop a vibrant and efficient life insurance industry to encourage prudence, long term savings and financial security to the insured families.
I hope that the Government will consider my suggestion to provide tax incentive to encourage people to make voluntary savings for the financial security of their families.
Tan Kin Lian
The best appraoch is to remove commission from all products and let the customers negotiate the fee that is appropriate to him or her. There is certainty of cost and the customers know what he or she is paying.The fee will include advisory and this is will force all advisers to provide and do the necessary advisory work and NOT push the products. Also make the advisers responsible for the advice so that the 'creative' insurance agents will not find ways and means to avoid or circumvent the process.It will be to the perils of the agents if he or she chooses to cheat, short change, taking short cut and push products.
ReplyDeleteAt the end of the day it will be win, win and win for all parties. Currently the insurance agents and the company collude to cheat the customers.
Hope MAS will issue directives to FORCE the insurers to adopt this model and NOT let them self regulate. Must not trust them. They are dishonest and greedy.
Don't forget disability income!
ReplyDeleteWhen you need to make a claim on the insurance policy, you should know who to contact? I know you don’t know but Allahabad insurance company provide this facility would suggest keeping your contact with your home owners insurance in your phone contacts and also in a second, easy to find location. That way, when you need it you will be able to find i
ReplyDeleteKin Lian,
ReplyDeleteI don't agree with you. There is no such thing as a good par endowment, par whole life and ILP products however best the design.
The fundemental role of insurers is to provide protection. The rest are bull shit and opened to a lot of abuse.
Just buy terms and invest the different!!!!!!!!!
While choosing an insuance company one must see what it’s needs, who can fulfill it & what his budget is, who can give the best in that budget. Here is an online tool which helps people to plan their insurance according to their needs & budget especially Life Insurance
ReplyDelete