Tan Kin Lian's Blog: Advertising and impact on policy bonus

Tuesday, March 09, 2010

Advertising and impact on policy bonus

When a business spends a lot of money to advertise its products or improve its corporate image, the money comes from the shareholders. They hope to attract more customers and earn the profit to cover the advertising cost.

The situation is different when it comes to large advertising by life insurance companies. The marketing expenses comes from the existing policyholders. The large amount that is spent will have a big impact on the bonuses that the policyholders can expect to receive on their savings. The more that is spent, the lower is the bonus.

In recent years, many life insurance companies have reduced their bonus rates significantly, but they continue to spend a lot of money on their advertisements. If the insurance company is truly looking after the interest of its policyholders, they should be increasing the bonus rates, rather than spending money on advertisements and marketing that do not benefit the existing policyholders.

If you find that you insurance company has big advertisements, you should ask this question. Are they spending my money? Is this affecting my policy bonus? Can I continue to trust this insurance company to look after my interest?

I have decided to terminate most of my life insurance policies, as I do not like the large sums that are being spent on advertising, marketing and image building (at the expense of existing policyholders) and the lower rates of bonuses that are now being given to the policyholders.

Tan Kin Lian

19 comments:

Anonymous said...: Big advertisement means more revenue to the SPH and SPH will give more visibility to the ceo of the insurance company. But at whose expense? Is the cost of the ad free?
Is it from the pocket of the management?
Remember this: COST EATS INTO THE RETURN, a fact any fools also know.
Cost makes a difference to your cash value.Do you now wonder why your policies giving you only 2% after 25 years?; March 09, 2010 9:32 AM
vincent wan said...: hi Mr Tan

i am confused by ur statement "I have decided to terminate most of my life insurance policies........"

Does it mean that most of us should also terminate our life insurance policies?

u did mentioned that it is not wise to switch to another life policy since we already incurred the upfront charges.

when u said terminate ur life insurance policy, i have to assume that ur policy have already accumulated some cash value? am i right?

how can we actually calculate the right time for us to terminate our existing life policy? when breakeven? 3% return?

thanks for ur advice!; March 09, 2010 10:18 AM
Anonymous said...: Spend more on advertising so ST can write favourably about ntuc and the ceo so both will be in the news always. Of course someone has to pay for them. Imagine no ad and little spending on marketing the money saved can go to increase the policyholders' bonus and the policy return, right? No need CPA qualification to know cost and return are inversely related, right?
There is one company who does not advertise or very little is Asia Life despite having shareholders, it is giving value for money products.
The question is what is the purpose of the advertisement? Professionalism? Rubbish!!! better spend the money on your insurance agents and teach them new tricks instead of product trafficking which ntuc agents are well known.; March 09, 2010 11:46 AM
Ex-Con said...: In the US, financial companies need to declare the marketing & sales costs for each of their investors' or policyholders' funds. They have to file this every year on a form known as 12B-1. Hence besides looking at the total expense ratios, customers also look at the 12B-1 figures.

Furthermore, many funds / policies in developed countries are monitored by independent companies such as Morningstar and Lipper, and they are not afraid to criticise those companies or funds where the managers' pay and bonuses are not tied to the fund performance etc.

In Singapore, the rules are heavily tilted against the consumer. The expense ratios you see do not tell the whole story. They exclude info on yearly marketing & sales cost, the trading fees and transaction costs, the percentage taken away from your policy's returns. Best of all, FIs in Singapore don't like to educate consumers -- they don't even explain about expense ratios, effects of deductions, distribution costs and how they eat away your value.

The only insurance company in Singapore not to reduce policyholders bonuses so far, is TM Asialife. Even so, their premiums have been increased for new customers over the years, and is not cheap. Most probably to meet increasing staff salaries and bonuses.; March 09, 2010 12:02 PM
Anonymous said...: Why some insurance companies advertise?
The truth is they are desparate for business becuase their salesmen are NOT bringing in enough sales. Not only ads their salesmen are also incentivised by gifts vouchers, trips and what nots to make these greedy agents work.
So it is money money, money here and money there.So what about it, you may ask? Money does not grow on trees and certainly not here. Who pays for them, for the insurance agents to enjoy themselves at Beijing,wine and dine at posh hotels and Siloso beach? It must be some suckers and the suckers happen to be the policyholders, right?
YOU are the suckers.; March 09, 2010 12:40 PM
Tan Kin Lian said...: reply to vincent wan

you should decide what is best in your own situation. do not follow another person's decision as the situation may be different.

read my book on practical guide on financial planning and my faq in www.tankinlian.com/faq on "existing insurance policy".

you will get some advice on what to do with existing insurance policies.; March 09, 2010 12:59 PM
Anonymous said...: We are bounded by the contract. Most of us took up insurance policies 10 - 15 years back. We have no say to what they do with our money.

For that matter, I also terminated all my policies and lost more than $30,000.

What can I say except that I was too naive to believe the insurance agents when they told me that their company will paid the non-guarantee sum in full and the non-guarantee protion is state as a formality required by MAS.

We honest people do not lie to others also expected the same truthfulness from others and thus never doubted.

An advice: Always ask the insurance agent to write down in black and white if they claim something about their company or the policy. And I tell you, they will never dare to do it.

Insurance agents - pants on fire. One day you will burn in hell.; March 09, 2010 1:05 PM
Anonymous said...: Spend large amount of money on advertisement? No problem, they should spend more cos I bought shares of SPH and hold very little wholelife/annuities/endowment policies hahaha! :p; March 09, 2010 2:54 PM
Anonymous said...: Today, if you look at the products they seemed to have come from the marketing department.
The play of words and expensive color brochure with pictures of couple and child at the beach or a young woman on a swing swinging away her life to the fullest and you are to visualise yourself doing these things.These are rubbish and consumers shouldn't be conned by these ads.
The basic needs are still the same. The need for high return and low cost protection have not changed.Can meeting in a posh place or buy from a company with posh building facade able to replace these needs? On the contrary, the products have become more expensive and the consumers short changed.
Professionalism hasn't changed, the salesmen are still salesmen and in fact worse becuase they have become more daring and bolder to lie and do things their predecessors won't think of doing.They are still product peddlers and they now traffic in products that are not worth paying the premium.
Don't be fooled by the new clothing, by the color change or by the titles the conmen and women are known as. On second thought, they have changed , they have become more professional in the conmanship.; March 09, 2010 2:56 PM
Anonymous said...: Ask them? It is extremely infuriating when you try to do that. The front line staff are too junior to know what is happening. The middle level managers play tai-chi while the top level people like the CEO do not even bother to reply you. But they send unsolicited letters and emails saying how great they are , how honest they are, how they look after your interest etc. It all sounded very hollow because when you try to contact them they do not even bother to reply. I suspect all those nice letters signed by the CEO are written to show the NTUC ministers and the board of directors that he is being nice to policyholders.
That is what we get nowadays with smart financial people running the show. They know how to look good with their bosses and bully the people below them. What to do?

Frustrated Policyholder; March 09, 2010 5:42 PM
Ex-Con said...: To "Frustrated Policyholder",

Take screenshots / snapshots of your emails, letters etc and upload to STOMP. Of course, blanko out personal info. Tell your story with pictures.

SPH may censor your posting, but it may get the word out. And who knows, ntuc may suddenly be more cooperative (no pun intended).; March 09, 2010 6:15 PM
Anonymous said...: They are heading for siloso beach tomorrow with your bonus to celebrate with thousand of agents.
There will be wine and liquor on the house and get drunk and strip for the shameless FT.; March 09, 2010 7:16 PM
Anonymous said...: Now you know why ntuc vivolife and revosave don't have good cash value.
Have you heard your agents telling you the return of these products?
No, right? They avoid and tell you all the craps about the limited payment, the 3 times accidental death and retrenchment but these are NOT the main benefits, right? You see, they are not truthful these unscrupulous agents.
Anyway, no trouble if you don't buy these products from ntuc and also from other companies.; March 09, 2010 7:46 PM
Anonymous said...: Yes , this article refers to ntuc income. So you see, where your bonus has gone to. Not only that your bonus will be spent in Beijing and thousands of them will gather tomorrow at Siloso beach to treat themselves to your bonus. Go there and confront them why are they spending your bonus. They will be there in their under wears partying away.
This is what this FT called contemporary in contempt of your bonus.; March 09, 2010 8:15 PM
Anonymous said...: I am curious about all the talk of holiday trips and posh dinners for ntuc. So I did some googling and got the below website. You can see the photos of the various dinners at restaurants, awards ceremonies, sales rallies, and also of their holiday incentive trip to australia surfers paradise. Check out the videos too.
I'm sure we will see more photos of the siloso beach party and the upcoming beijing incentive trip soon.

Where your bonuses go to; March 09, 2010 11:09 PM
Anonymous said...: Can you see your bonus going up in smoke now?

Whatever policies you have, old or new they will be languishing in low return.If you are depending on the cash value for retirement I advise you forget it. Better wake up now and engage a more honourable, trustworthy, competent, really qualified and not koyok salesmen disguised as senior or executive financial consultant, I mean insultant,to review all your policies.Bite the bullet and get ready to know the shocking truth and how your trusted 'consultant' insulted and betrayed you.; March 10, 2010 12:07 AM
Anonymous said...: Unless you policyholders take action now and cut losses like Mr. TanKL, all policies will rot and rot over time. No one to blame after 20-25 years you found out your policies returned less than inflation and your retirement plan foiled and you may have to work as toilet cleaner to cover your shortfall.
Do it now.. Take your agents to court. Blow the whistle. Report to MAS. Do what you have to do. Just do it!!!!!; March 10, 2010 12:17 AM
Falcon said...: I think the only way to improve performances at NTUC Income now is to implement the 360 degrees appraisal system where policyholders inputs, and not selected inputs to put up at their branches to give the impression that they are good, be implemented. For example, every agent's performance need to be endorsed by their clients as well. The CEO and management likewise will need to have inputs from the policyholders on a holistic basis. We can have a website where policyholders can log in and input their policy details and then input their assessment of the management. But ultimately, like what Mr Liew Mun Leong of Capital group has said, it is the CEO of the company to be leading the charge on service excellence. Otherwise, whatever training and initiatives will also fail if they do not get the support from the top. My suggestion to have a 360 degree appraisal system stems from my observation of the present management team of NTUC Income where I see a disparity between what is delivered on the ground vs what is beautifully displayed as visual cues to the board of directors and the ministers as a deficiency in execution rather than a deficiency in knowledge, meaning that the management team is well aware of what is required but only giving lip service and worse, manipulating a positive perception of service to the select few who mattered in their own promotions and bonuses.; March 10, 2010 12:57 PM
Anonymous said...: In ntuc service lounge hung the vision , the charter and mission statement and that is what they are for, part of the deco. From the mouth daringly spewed, filth and garbage. At the ground low return and expensive protection.; March 10, 2010 9:53 PM

Tuesday, March 09, 2010

Advertising and impact on policy bonus

19 comments:

Blog Archive