Some life insurance products were designed to provide an annual cash bonus. The underlying return on the policy is poor, usually less than 2% p.a., due to the high expenses and profit margin. To enjoy the cash bonus, the consumer has to pay an additional premium that is usually more than 10% of the cash bonus. For example, to get a cash bonus of $2,000, the additional premium could be $2,200 a year. The consumer is not aware about this type of structure.
To hide the poor return, the insurance agent tells the customer that the cash bonus can be re-invested in an investment linked fund to earn 5% or 9% per annum. This is stated to be not guaranteed, but the consumer does not know that the projections are over-optimistic.
By illustrating with this high projected return, the benefit illustration will show a higher return on the policy, perhaps 4% or more. If it was possible to earn 9% per annum, the consumer should invest the entire premium into the investment linked fund, rather than just the cash bonus.
I hope that the authority will ban this type of projection, as it is misleading to the consumer.
Tan Kin Lian
Nothing is true these days. Dishonesty is the only way to make a living and the insurance agents have exemplified this maxim.
ReplyDeleteStrangely the regulator closes its eyes to all these activities but asking the consumers to open their eyes big big.I just wonder on whose side is the regulator on.
Regulator is on government's side.
ReplyDeleteGovt is siding with whoever & whatever can maintain and boost GDP.
Who do you think can boost GDP? A bunch of folks with life savings of $50K to $300K? Or hundreds-billion dollar banks and financial companies?
If suddenly got some freak situation where big MNCs and A*Star pharmaceutical companies suddenly say due to govt's handling of structured products, they no longer have faith in S'pore govt and will be pulling out, you can be sure that govt will start whacking the financial industry, handing out million-dollar fines, suing and throwing some people into jail etc.
MAS should throw some insurance agents and RMs into jail to set good example. Also throw CEOs in jail on top of multi million dollar fine to let them know high pay means high risk too.
ReplyDeleteMAS should invoke the FAA to deal with rogue salesmen and women to restore consumer confidence.Many have stopped buying life insurance especially the par products becuase of these rogues.
In order to have a good image, the first thing to consider is honesty.
ReplyDelete