Tan Kin Lian's Blog: Replacing a whole life policy

Monday, March 08, 2010

Replacing a whole life policy

When an insurance agent approaches you to tell you that a new policy is better and advise you to give up an existing policy to convert into the new policy, the insurance agent is 99% likely to be cheating you. Do not believe the agent.

Ask the agent to give you a benefit illustration and send it to me at kinlian@gmail.com. I will point out on where the agent has been misleading you, and how much you would lose in your savings by taking this type of advice. It can cost you a few thousand dollars.

One common practice is to replace a whole life policy by a policy with premium paid for 20 years or shorter. The customer does not know that he has to incur a hefty upfront cost a second time. The premium for the shorter period is much higher than a whole life policy. Further more, the existing whole life policy has an option to covert into a paid up policy at any time, i.e. the policyholder retain the flexibility to stop the policy at any time (but the agent does not explain this option to you).

If you are buying a new policy, you can decide on whether to buy pay a lower premium for a lifetime, or a higher premium for a shorter period. (Frankly, both options are not good for consumers, due to the high upfront cost). But, you should NEVER stop an existing whole policy policy to move into a new policy, as you will be incurring a large cost for the second time.

Tan Kin Lian

7 comments:

Anonymous said...: Consumer products, like electrical appliances, can get better and cheaper becuase of techology and better processes but not insurance products especailly products with return and protection bundled together. In fact they are worser, like wholelife and endowment products . Because these products depend on low cost and higher interest rate to give reasonable return and low cost protection. However, it is getting more difficult to have low cost and higher interest rate and to cover up the increasing cost and poor return the insurers tweak the products to hide them.
One popular approach is manufacturing the 'limited payment term products' to make them look new with special features. No, this 'limited payment term ' is nothing new. It is actually paying high premium upfront to cover future premiums. The shorter the term the higher the premium. This is a marketing distraction ploy and its intention is to cheat consumers into thinking that it is new and good. The truth is they are worser than the old wholelife products in that they are more expensive and consumers are finding it more difficult to afford more to insure themselves adeqautely. This is the reason consumers are getting more under insured.This is bad but do insurance companies care? Do the insurance agents care about your protection? Have you heard them stressing adequate protection? No, they peddle them as paying shorter premium term and insured for life. This is the NOT the reason why you take up insurance. Insurance is about insuring against the risks that you face while bringing up your kids and dependents. And you MUST have enough of it to have peace of mind. But this is not stressed and not insurance agents' concern, their interest is a product that gives them high commission.
So , don't fall into the trap when your trusted insurance agent tells you that there is a better product and tries to convince you to replace or take up.Your old wholelife product is better. There is no such thing as better wholeife products unless they give higher return and low cost protection. You know the old products give higher return of 4%+ and low cost protection but new products give only miserable 2% after 25 years. Adding more features does not improve the protection and return. In fact it is adding cost and worsening it.The new wrapping is a marketing trick and it is meant for the agents to pass them off as new to you. Don't be fooled. Your agents are not that sincere and honest. In the first place , if your insurance agents are qualified and competent and honest and put your interest first you would have ALL your needs addressed in the first meeting.You should have the peace of mind long time ago already and not having gaps or shortfalls your agents are telling that you still have if he or she had done a good job.
So you see, your agents disguised as financial consultants are actually conmen and women and thieves 'draining' off your resources slowly but surely under the pretext of reveiwing and new product offer and you don't even know it.
Report them to MAS if your agents persuade you to cancel, replace, convert to paid up and try to convince you to take up their new product.
Remember you are the loser and worse the sucker in this scam.

The Watchman; March 08, 2010 12:50 PM
Anonymous said...: Cannot sell to new customers so get old customers to replace their old policies or convert old policies to paid up. Isn't this what ntuc agents aka financial consultants are doing?
I just wonder why MAS is not coming down hard on these conmen and women?
Wonder why MAS is finding excuses not to replace commission with fees? It is an evil that must be ridden of.
It is very clear, glaringly clear that commission is behind all this. Nip it in the bud this evil and implement the need based methodology and make these koyok salesmen and women responsible for their advice and recommendations. Also ban the product pushing option and assume all customers or investors are novice and clueless and vulnerable.
If die die customers insist on product advice then customers should be exempted from commission and only pay a token premium to the agent for filling up the forms.
These abuses must be stopped and the underlying reasons are obvious.
Because of commission, insurance agents find ways and means to make customers choose product advice option so that they don't need to justify recommendation on reasonable basis and push the blame to the customers and so that they can push product with high commission and dubious new products.; March 08, 2010 1:59 PM
Anonymous said...: Yeah, I work in ntuc's business centres. Convincing customers to buy vivolife and stop their older protection policy is 1 of the bread-and-butter tactics we use. The other 2 popular tactics is to target parents to buy 3rd-party wholelife or endowment for their kids, and to target younger adults to buy vivolink (regular ilp) for so-called investment. These 3 methods are casually "taught" to us by the sales managers.

Some of the more responsible (or smarter) consultants will advise customer to convert the old wholelife to paid-up and buy the vivolife to make up the difference in insurance cover. Many consultants will just ask them to surrender the old wholelife, and use the cash value to help buy vivolife.

Ironically, the good value of the older ntuc wholelife works against the customer. Because many of them already more than break-even, hence easier for us to convince customers to surrender and pay just another 10-15 yrs for a new policy.

This is harsh reality of insurance business. What to do? We all need to meet sales quotas to keep our jobs. I also feel that mgmt overpays everybody's salaries (incl. the consultants) hence need big sales and revenues to cover.; March 08, 2010 4:02 PM
Anonymous said...: Since the appearance of limited payment term wholelife living products policy replacement has spiked.It has again proved insurance agents never put their clients' interest first. The aim is to create new business production and of course commission is the real reason.
This also proves another point that consumers are clueless and financially ignorant. MAS must now accept this fact that consumers need protection from the predatory insurance agents. MAS is wrong to say that disclosure of information can help consumers to make informed decision. Consumers can't otherwise how does MAS explain why consumers are falling prey to churning and replacement of policy.Consumers , if they are savvy, should know that it is to their disadvantage to replace an old policy. Hope MAS is not to blind or pretend to be blind to this fact.
I must stress here that limited payment term product is NOT a good product.It short changes you.; March 08, 2010 4:39 PM
Anonymous said...: I think ntuc got #1 becuase their agents were persuading their policyholders to replace their old living policies with vivolife.
Anyone who was asked to replace and did replace should lodge with MAS becuase you were made a sucker.; March 08, 2010 6:09 PM
Anonymous said...: Not only the ntuc business centres are doing that all other agents are encouraged to do that becuase the argument is that convert the old one to paid up or cancel it the new vivolife is considered a new business and on top of it the commission is better for the agents.
This is how they got to be # 1.
MAS must be informed of this and I hope witnesses are forthcoming to testify against the agents who did that. Then what is the whistle blowing channel for? I wonder MAS is reading this.; March 08, 2010 8:19 PM
Anonymous said...: Whistle blowing is ineffective not becuase the insurance agents fear reprisal but they fear being marked by management. Management knows that the unethical practices of the agents will bring in more sales.After all they have been closing 2 eyes to all these malpractices all this time.
MAS should have one open to all agents to report against the rogue ones; March 09, 2010 9:25 AM