Wednesday, April 07, 2010

Tell a blatant lie

The benefit illustration of a life insurance policy showed the distribution cost to be 7.3% of the total premium paid over 25 years. If the total premium amounted to $100,000, the distribution cost was $7,300. The insurance agent twisted the figures and said that the cost was only $292 a year and amount to 0.3% of the invested sum (i.e. similar to the cost of investing in a exchange traded fund).

This is a blatant lie, as the annual cost of $292 is still 7.3% of the annual investment of $4,000. The agent twisted the figure to confuse the clients.

How many agents adopt this type of dishonest way to sell their high cost life insurance policy? Is this type of blatant lie being taught to the insurance agent by their training managers?

Do you know which agent you can trust, and which agent to avoid? It is important for consumers to be educated and avoid falling into this type of trap. Spend $12 to buy my book, Practical Guide on Financial Planning, and learn a better way to manage your savings and investments through an exchange traded fund. Do not spend $7.300 as distribution cost in a financial product that gives you poor value.

Tan Kin Lian


Anonymous said...

Now you know that insurance agents are liars.They are so good at conmanship that they can lure a bird down from a tree.
They are trained to lie, manipulate the hot buttons and suck up to the customers and beg if all else fails.
To stop this MAS must remove the commission. Commission is the evil reason behind all the malpractices. Remove it and see what insurance agents will come up this time.
To protect the consumers heavy penalty must be imposed. If the agents fail to provide recommendation on a reasonable basis they must be punished..
Believe it or not I was horrified to see how agents are trained to write their KYC by a social enterprise.
Example: analysis reveals the client requires $900K to address dependent income replacement need.Do you know how much and what product is recommended ? Shocking, only $100K and the product is a critical illness limited payment whole life product. Reason is client has not enough budget and he is advised to buy more in the future...Is this recommendation on reasonable basis?
MAS, insurance companies are teaching their agents to make a mockery of FAA and worse blatantly committing them with a 'so what' in your face.

Anonymous said...

Why use limited Critical illness product WL to treat 'dependents' income replacement'? It is the wrong medicine , right? Worse it is also expensive .No wonder the client cannot have enough. It is definitely conflict of interest.Imagine you need $900K and the agent says you need only $100K becuase you don't have enough money.Not enough money?
The premium from the whole life limited payment critical illness product can buy millions of coverage. What not enough? Conflict of interest in this case.
You know why agents sold $100K? becuase he or she knows that this client will have shortfall and he or she can 'review' the client's insurance needs in the future when he the money.
With insurance agents the word 'review' has a different meaning. It means to sell another policy or an opportunity to promote a new product to meet a shortfall that was purposely created in the last meeting.This opportunity will not end until the client dies.
This is called creating 'needs' in insurance agents' modus opprendi.

Anonymous said...

If 4.1% is not guaranteed but you say otherwise, is it a lie?
Is 5% guaranteed is but 5% of sum assured refund, is it a lie?
If it is better than bank rate is misrepresenting , is it a lie?
These are some of the lies I heard insurance agents are using to convince customers to buy.

Parka said...

The reason for the high cost is really because there are people cost.

Insurance should be made into a commodity and all these middle man should be removed from the value chain.

Paul said...

Mr Tan,

why don't you publish NTUC's distribution costs and returns for consumers on their products? It seems like u make NTUC out to be the benchmark we can believe in.

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