Tan Kin Lian's Blog: Cash back policy

Friday, June 25, 2010

Cash back policy

Comment posted in my blog (edited)
The whole idea of cash back is to confuse the consumers. Imagine the executive financial consultants cannot calculate and know little about this product, how do you expect the consumers to understand.

One social enterprise launched another product recently. These consumers will be in for a good ride when they find out that the projected return will not be delivered after 10 years. These consumers deserve it for trusting their agents. Don't know whether to pity the consumers or not.Consumers may think the cashbacks are interest earned. They are actually your own money returned to you as cash back. The agents are silent on this. The agents were trained not to mention anything until you ask. They tell the customers the points that 'sound' good and suppress the risk to the consumer.

My comment
The insurance agent compares the yield of these cash back product (around 1% per annum) with the low rate of interest on bank deposits. This comparison is wrong. Consumers should not lock their savings for 10 years or longer at the low yield. A fairer comparision is the yield on government bonds of the same duration, which should be more than 2% per annum. Furthermore, the government bonds are liquid and can be sold at a fair market price, without the heavy penalty that is found in a life insurance policy.

Learn about the "effect of deduction" from Practical Guide on Financial Planning.

13 comments:

Anonymous said...: The SGS bonds are risk free, liquid and may give higher return. These cashback endowments are really scam conning those ignorant and trusting consumers. If the agents are honest and sincere about putting their clients' interest first they should recommend bonds..Honest agents should help the clients even they don't make money from the deal. The problem is insurance agents are salesmen who are only interested to sell any products that give them high commission. The don't give the best to their clients.
Consumers should be aware of this.
To safeguard yourself if any agent comes to you to promote a product that agent is only a salesman he or she should be avoided.Don't continue .; June 25, 2010 9:25 AM
Anonymous said...: I have a general negative opinion on many insurance companies as I think there is a conflict of interest in providing products and services to consumers and at the same time making a return on these products and services. That is why I prefer to find out many things on my own from various people about insurance and endowment products in the market before I commit with a certain product from any particular insurance company. Basically, I believe one should approach what any insurance agents say with skepticism even if it may sound very good. Always ask them challenging questions on the risks involved and the negative points in any products they are peddling. If they say the product has absolutely no risks and negative points at all, then be very careful as there is no such thing as a perfect product in this world........ :-); June 25, 2010 10:06 AM
Anonymous said...: The product from ntuc is REACH and is reaching to those ignorant dummies who are easily conned. Do the agents care? Only the ocmmission...
Let me ask the agents if they claim to be professional, competent and honest . In what aspect of the clients' financial goals can REACH address? Is it preservation? Is it accumulation?
None.. if it is preservation the clients must be rich and it is better that they buy bonds...If it is accumulation the cleints must be needy people who are concerned with meeting their financial goals and REACH is a RISKY product and it is conning the clients.
Please be honest and competent and put the cleints' interest first. if you are NOT competent get out of this business before you harm more people. Be conscientious.; June 25, 2010 10:26 AM
Anonymous said...: Although banned by MAS ntuc agents at roadshow are still using bank rates as comparison to make their product return look good, especailly their revosave, vivolife and now reach.These products ' return are rotten and to con people they use this comparison.
MAS must send out mystery shoppers to check on them before more consumers and passers-by are conned.
This is misrepresentation and it is misleading and therefore it is cheating.; June 25, 2010 11:26 AM
Anonymous said...: This comes to show that not many feel that they are being conned by these agents. If all consumers are so smart, these insurance companies can close shop and agents go take a hike. I see that in the end, you are merely promoting your book, Mr. Tan. Monies saved and returned back is some sort of a retirement income. Many people dont save for retirement hence such plans are there for 'forced savings' where non-payment will result in total or partial loss of money. How many years does one CPF can last?; June 25, 2010 12:51 PM
Anonymous said...: anon June 25, 2010 12:51 PM,

this is insurance agents' rubbish talk about 'forced saving'..What do you mean by forced saving? I don't want to be conned into so called 'forced' saving in some guaranteed loss products like revosave, vivolife and reach. It is because of these scam product that many cannot retire.Only salesmen and conmen used this expression to con people. Financial planners don't and only salesmen and conmen push products that they are forced saving plans.
I believe you are an agent from NTUC. Go to MAS website and see for yourself the lapses and early surrender of these so forced saving plans.As a insurance agent you know these people sure to lose money. What talk you about retirement?
Anybody who buys ntuc products definitely cannot retire.These agents are unqualified and they are salesmen and conmen conning and misleading their policyholders.
When you make this statement "How many years does one CPF last?" only proves how ignorant and unqualified you are. No wonder you are pushing and conning people with these products that guarantee sure loss.; June 25, 2010 1:45 PM
Anonymous said...: Agents responsibility is with the Principal. The Principal is the company they work for which in this case is mostly the insurance companies

This is clearly established in law

If there is still doubt, ask how the agent gets paid? Largely through commission. Who pays the commission? Is it the consumer or the Principal?

So take the time to understand what one is buying. There is no need to blame the agents.; June 25, 2010 2:56 PM
Anonymous said...: It's funny, despite all the conmen around, there are still gullible people foolish enough to be conned.. Business goes on as usual, the insurance industry continue to boom and agents make their money. Its a perfect balance!; June 25, 2010 3:08 PM
AMG said...: Well said there.. if the agent is a con, the principal knows how to deal with him. These agents are merely promoting products, of course, to their best knowledge. Whether get con or not, the agent is doing his job, and the customer willing to pay. Done deal. End of story.; June 25, 2010 3:36 PM
Anonymous said...: June 25, 2010 2:56 PM &
AMG.
have you heard of the need to conduct due diligence? Have you heard of recommendation on reasonable basis? Have you heard of appropriateness relative to customers' circumstances?
Sorry, it is not the end of business.
Insurance agents are answerable to the above.
Now get it right and if you haven't I suggest that reread the contract of Principal and agent relationship.. You and the company are severally or jointly liable for the professional misconduct.
What does that mean? It means you are doing business on behalf of the company. It does not mean you have NO FIDUCIARY DUTY to your clients. Your fiduciary duty to your clients is to put his interest first; to see the products meet his goals adequately and the best; you are to conduct due diligence on the products if they meet the cleints' goals FULLY and to the BEST or reasonable basis.You cannot hide behind your company.
If the agents fail the above he or she has not DONE the Correct job and therefore liable to clients for acting or not acting on the advice of the products recommended.It is aggrieved customers' option to sue the agent or the company.
Because it is NOT reported to the company the company has no knowledge of the misconduct.
The client didn't take time to BUY for he or she had no idea of the products but he or she was SOLD or CONNED.
Remember , in the insurance circle they used to say 'life insurance is NOT bought but SOLD".
I suggest that if both of you are from ntuc go back and consult your supervisor or your CEO on this matter. Your posting shows how shallow your knowledge of insurance. Ntuc agents are salesmen, product pushing salesmen masquerading as financial consultants and it is an insult to the title.; June 25, 2010 6:38 PM
Anonymous said...: Another player offering online insurance for car, personal accident, home,etc.. In time these online portals should be able to offer life insurance like wholelife , endowment,ILPs and funds. Funds are already offered online. It is NOT difficult because most consumers in Singaporeans bought or sold their life insurance based on product advice and if the portals can offer product advice by disclosing all the necessary details of the products for consumers to make informed decision, a calculator to calculate the quantum of coverage, i don't see why insurance agents are needed.What worth while advisory service do they give with insurance agents pushing products.
The portals can replicate this product advice service and it is better without the middleman who might be dishonest .Most of all there is great saving on the huge commission paid to these useless agents. The products should be as cheap as 100% of premium (usually 150%)discounted.
I urge these players to look into this to save the consumers from being conned and robbed by these salesmen masquerading as executive financial consultants.Wonder what they consult in, maybe insult.; June 25, 2010 11:11 PM
Anonymous said...: u get back yr own money, it is much better than some "advisers" pretending to be "Intr" & "recommend" u some things that could make u loss all yr principal.
How to trust these "advisers" pretending to be "Intro" yet giving advices????; June 26, 2010 8:04 AM
Anonymous said...: Yes, online life insurance like whole life and endowment and other plans should not be a problem. Looking from what the insurance agents are providing, product advice only, the online providers can even be better. The buyers will be forced to read and understand the product information and illustration before buying. With an agent this is hurriedly done. The customers, 10 out of 10 don't understand and been pressured into signing . With the portal the customers can take time to decide. This perfectly fits MAS's caveat emptor. Every buyer takes responsibility and ownership of the buying . There is no middleman to interfere and influence the buying process. This will turn the old adage of insurance as being sold and not bought. Now it will be bought , and with eyes wide open and enjoy the huge discounts which would have gone to insurance agents for doing nothing except form filling and execution.
MAS must make the insurers to offer this facility to savvy customers , to begin. These savvy customers don't need advice except product information. I am told that Singaporean customers choose product advice and this puts them in very savvy customer group. So the online model will succeed as evidenced that customers prefer product advice option.; June 26, 2010 10:03 AM