Tan Kin Lian's Blog: Transparency in life insurance

Thursday, February 25, 2010

Transparency in life insurance

A life insurance policy provides two useful services:
a) insurance against premature death
b) investments of savings for the future.

For the first service, the consumer wants to pay a fair price. The consumer does not want to be overcharged,compared to similar insurance offered by other providers. For the second service, the consumer wants to get a fair yield, comparable to the yield that can be obtained from other investments with similar risk profile.

A good insurance policy is transparent and give good value to the consumer. Unfortunately, there are many life insurance products that are not transparent and give poor value to the consumers. It is difficult for the consumer to distinguish between the good and bad products.

The benefit illustration for the insurance product can give some indication about the fairness of the charges and the yield. Look at the distribution cost, which is the amount that is taken from your savings. If it is $1,000 or more, it seems to be excessive. Do you really want to pay such a high fee to the insurance agent, who may be someone that you do not know previously? This fee is taken away from your savings, which is the same as being paid directly.

You can also look at the "effect of deduction". This is the total amount that is taken away from your "accumulated premiums" during the lifetime of the policy. If this amounts to a high percentage of the accumulated premiums, then you are being offered a policy of poor value.

I have written a separate article about the the percentage that is fair, and the percentage that is excessive. If you are not sure, you can write to me at kinlian@gmail.com. I can answer you directly or refer you to FISCA, www.fisca.sg

A life insurance policy can represent a large part of your future savings for a lifetime. Make sure that you get a fair deal and a good yield. Make sure that you are being advised by a honest agent who takes care of your interest (and not his own personal gain). Do not make a bad investment that will penalise you for a lifetime.

Tan Kin Lian

8 comments:

Anonymous said...: What transparency? You can have 50 pages of disclosure and if not explained to the buyers it is as good as not disclosed.
Insurance agents don't go through them with the customers and often these product pushing agents discourage it.
The so called social enterprise has many times said they are transparent and honest but they stopped providing the yearly yield of the wholelife and endowment. In Mr. TanKL's time all quotations provided them and customers could see the yields even the stupid insurance agents could not calculate. But now, it is covered up and it is left to the unethical agents to say the yield and it can be anything.This is the transparency and honesty of this social enterprise.
I bet many customers who bought their products don't even know. This is dangerous when you wake up one morning 20 years later to find your policies have not broken even yet and you have wasted 20 years which you can't get back except to sue the agents for loss of money and time while your agents are having a splurging time in Beijing.; February 25, 2010 12:17 PM
Anonymous said...: Do you know how the social enterprise got #1? Use a lot of capital plus to heap and plaster up the production and cover up the miserable APIs.But some people unashamedly still speak of 'achievement and professionalism' of their super duper salesmen.; February 25, 2010 10:01 PM
Anonymous said...: If you have bought any of these products, revosave, vivolife or vivolink have them checked by FISCA for mis-selling and conflict of interest. it serves you well to discover early before you lose more. Don't wait until 20 years to find that you have been played out by your insurance salesmen disguised as financial consultants.These products can NEVER address your concerns adequately let alone meet your needs and peace of mind to let you live life to the fullest.Don't be fooled by the ad. It is misleading. You will be shocked if you should really encounter the event and find out that you are FAR AND GROSSLY UNDER INSURED . In fact you live your nightmare to the fullest. So , check with FISCA before it is too late.; February 26, 2010 10:24 AM
Anonymous said...: eg. Life insurance or medical insurance.

If you have declared pre-existing conditions and the insurance decides not to cover those ailments, how come the premium not reduced proportionately with those reduced risks coverage?; February 26, 2010 11:39 AM
Anonymous said...: Anon February 25, 2010 12:17 PM,

You know why ntuc dare not show the yield?
1. so that their agents disguised as financial consultants can con their policyholders . So that the agents have the freedom to 'pluck' a figure to fool their customers.
2.The yield is too low and not decent to show after the cut in the bonus.
3.so that the agents can push products; February 27, 2010 10:43 AM
Anonymous said...: So much for transparency and so much for 'honesty is the best policy'.
That was what ntuc advertised. You can see they would do and say anything to achieve their ends without batting an eyelid..
Is #1 a surprise?; February 27, 2010 12:51 PM
Anonymous said...: Anon February 27, 2010 10:43 AM

Ha Ha , don't expect the agents to tell you the yields of revosave or vivolife..They can't calculate also.
They are executive financial Insultants.heeeheee.; February 27, 2010 2:17 PM
Anonymous said...: February 27, 2010 2:17 PM

That is how they got #1, by conning , by suppression, by concealing , by pretending, by confusing, by not calculating and by contradciting.; February 27, 2010 5:57 PM