Dear Mr. Tan
Does the purchase of AIA by Prudential result in less choice for consumers?
REPLY
Most insurance companies offer different products which are difficult for consumers to compare. Nearly all of them have charges and give a poor return to consumers. The reduction in yield is about 3% in most cases. This could reduce the payout on maturity by more than 40%. If your premium can accumulate to $500,000 over the next 30 years, the insurance policy pays you only $300,000 - with 40% being taken away.
Consumers have a choice to invest in a low cost investment fund, such as the STI ETF available on the SGX. It offers diversification and an attractive return over the long term (by averaging out the good and bad years of the market). They can buy term insurance, decreasing term insurance or personal accident insurance to cover the risk of premature death.
This is explained in my book, Practical Guide on Financial Planning ($12). It is available in most bookstores or can be purchased from my Internet Shop. It comes with a free Shape Quiz minipack (worth $2).
There is no loss to consumers . In fact better for comsumers having fewer companies to confuse. When companies offering rubbish products ceased to exist do you feel the loss? No, it is good riddance.
ReplyDeleteRemember , never to buy par products , ie whoelife or endowment or regular ILPs from any of the existing companies , including ntuc, you will be safe. Just bear this in mind. Just go for plain vanilla products, unbundled, pure products. For insurance buy term and for saving buy regular single premium plan.
Don't trust agents with misrepresenting title like financial consultant whether with a senior or executive prefix they are all suspects, snake oil salesmen or precious stone conmen and women.Another suspect is agents with MDRT, cot or tot logo.They are even worse , they are thieves.They got the titles becuase they conned enough people to qualify for the awards.
Bear the above in them and make every insurance agent a suspect and you will be safe. Of course ask a lot of questions, like
"how much commission do you get from the sale of the product you recommended to me."
"Is there an alternative?"
"how do you know that i need this product when you don't even examine my circumstances and needs?"
If the agents fumble for an answer just politely tell him or her that it isn't the right time for you to think of insurance.
It will serve yuo well to do all that.
I hope having fewer insurance companies will not turn out to be like the banking industry.
ReplyDeleteWhy are people now complaining about excessive bank charges? No competition does not mean cheaper services will be the result. On the contrary, a few of them left will band together to form a cartel, which will be even worse for consumers.
Be careful what we wish for.
Great info, i glad to see this blog, such an informative article, Thanks for share this.
ReplyDelete