Tan Kin Lian's Blog: Case study - lower insurance premium

Sunday, May 16, 2010

Case study - lower insurance premium

This is a case study. You are insured with an insurance company that has been operating fairly efficiently and has been providing satisfactory service. It incurs the following expenses and charges a premium of $1,000:

average claim per policy $550
expenses $200
commission to agents $150
profit margin $100
premium $1,000

Another insurance company offers you a lower premium of $900 but if the lower premium is due to any of the following factors:

a) they are more efficient in handling their claims
b) they are likely to be more difficult in paying claims due to inadequate premium
c) they may offer a lower quality of service
d) they are keen to gain market share and don't mind making a loss

Here are the results of the survey.

8 comments:

Anonymous said...: Mr. Tan,
Besides cost, one also look at the quality of customer service. For example NTUC has a very efficient system whereby when you send an enquiry, you will get an sms and an e-mailrely within 30 seconds that promised you that they will attend to your enquiry within 1 working day. The problem the human behind it can not deliver the promise. I have been sending 3 e-mails to them and get the automated reply but after 3 days, no human reply to my question so one become very frustrated. I am thinking of changing insurer.; May 07, 2010 8:22 PM
Anonymous said...: The customer service is non financial and is no substitute for delivery of good return and low cost protection. This is what you buy insurance for and not for the service alone. Don't let insurance company fool you and cover up the rotten core with excellent service becuase they won't help you to retire or insure your risk adequately.
Insurance is about low cost and high return and protection at low cost and not some fancifool lifestyle craps some company claims their products can give.
You notice nowadays the products claim to provide or shout very loud about lifestyle and can let you live life to the fullest. If the return is low and protection is so expensive how do you achieve those craps. I thing the insurance agents and ceo will be the ones who will be living life to the fullest with the huge commission from these products.
It is like telling you to live on love and fresh air with style.Craps!!!!dream saver...it is nightmare.; May 07, 2010 10:02 PM
Anonymous said...: There is one social enterprise resorting to commercial practice by advertising heavily, thinking they can cover up the rottening return and distracting the public from the expensive protection cost.They even advertise their ancient historical returns to mislead and misrepresent the future.
Consumers have to be careful. The good returns are from Mr. Tan Kin Lain's era and do not represent the future.scrutinise the BIs with eyes open big big or ask the agents the actual return and if possible ask them to give in writing.I assure you will be shocked to hear. On second thought you wont' hear because they will avoid telling you.
These are the reasons they are advertising. But where is the money from? from the products? from the life funds? wherever it is cost, right?
Another thing , don't let the special bonus of $400+ millions distract you from the real long term return.If you divide up by 2 millions what do you get? What is next? drain you off in another way?
Be careful.. it is very cunning..
Don't let all this fool you. Knowledge of primary school math is enough to understand what it is up to.; May 07, 2010 11:22 PM
Anonymous said...: Unfortunately people do not appreciate those who are honest and truthful. They prefer to believe in the conman who speaks with fork tongue. They like to see the headline picture with the conman shaking hands with the policyholder but did not question how come the journalist suddenly appear in the house to take pictures when even more important news the same journalist can miss out.
There are lots of such stupid people around and the foreign conman will have a feeding frenzy, with the support of the govt.; May 08, 2010 12:09 AM
Anonymous said...: The journalist is paid or caught between the legs so to speak, to go along with his modus operandi or else no big ads for ST. Only stupid policyholders will beleive the news. It was planned or staged.
You know he is very clever when it comes to this.His cunning grin and small eyes is telling. But he forgot something. In the 2 million policyholders there is ONLY ONE POLICY that is that old. What happened to the rest? lapsed, surrended or terminated? Don't kid us.; May 08, 2010 10:13 AM
Anonymous said...: Nowadays, you must give a lot of discount when reading or watching ntuc income.It is NOT a cooperative anymore. They can call themselves by other names it is still not a cooperative. The products are expensive; the return very low; products with lots of frills to bullshit consumers; the agents get more unscrupulous etc. They even used ancient history of his predecessor track record for his face and claim his own.
Always claim that honesty is the best policy but no yearly in the quotations now. Scared to show rotten yield? If it is transparent and honest even rottten yield must show, right? They think by talking louder it will become truth. please don't trust them. Don't trust salesmen and women.; May 08, 2010 7:16 PM
Premium Health Insurance said...: I have a question: Will you get in trouble if your car insurance is in the wrong state?; May 12, 2010 11:06 AM
Green Marketing said...: to the person above this post:

Insurance companies always look for a way out of paying if possible and i suspect that if you should happen to get in an accident and they can prove your residence is different than that of whats on your policy then they may indeed have a case for declining a claim based on the documents you signed.; June 09, 2010 12:24 PM