Tan Kin Lian's Blog: Effect of deduction and distribution cost

Thursday, June 10, 2010

Effect of deduction and distribution cost

Dear Mr Tan,
My mother just bought a Whole Life insurance that is payable for 24 years. She also tag on a Critical Illness rider.

After reading your numerous posts on how expensive life policies are, I would like to seek your comments on the benefit illustration given to my mother. She is currently still in the 14-days free-look period.

REPLY
The benefit illustration shows that the distribution cost is almost two years of premium and the effect of deduction is more than 40% of the value of accumulated premium. They are both too high, giving poor value to the policyholder.

Please read my book, Practical Guide on Financial Planning to understand these two important measures.
The book provides the benchmark on what is an acceptable level for the effect of deduction for various durations of the policy. You can buy the book at www.easysearch.sg/ishop

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4 comments:

Anonymous said...: Dear consumer,
NO NEED to consider about the wholelife product, just cancel it. It is a scam product. It is so complex that there so many things the agent didn't tell you.
First, with this product is your mother adeqautely covered? I am 100% sure she is NOT. Why? because she can't afford more. Why? because it is so expensive? Why? because the greedy agent and the company share a big chunk of the loot robbed in braod daylight from your mother. Why? because your mother, like all others , was ignorant and clueless and got CONNED. Why? because your mother hhas NO knowledge of life insurance and what is best for her and how much she needs to cover.Why? because she is NOT trained in insurance.
Cancel it.. check the fact find form and I bet it is a product advice option 3, ie your mother was pushed the product without her needs examined first.By ticking option 3 your mother is considered as savvy consumer, you know? Why did the agent push the product? because the agent need not justify the suitability of the product.Your mother was considered a savvy consumer.She CHOSE THE PRODUCT AND REQUESTED for product advice and therefore the agent is free from blame and any liability if it should go wrong. This is the consequence because your mother asked for product advice and she knew waht she was doing.
Of course we all know your mother wasn't and didn't but conned into doing it. She was conned into ticking the product advice option so that the agent could sell a product with high commission without need to justify the suitability to benefit himself or herself.Do you see it?
Cancel the policy and check the fact find form and complain to the company for mis-selling and you can lodge a complaint with MAS; June 10, 2010 7:34 PM
Anonymous said...: Consumers... if you choose product advice or option 3 you are considered a savvy buyer. You are considered to have knowledge of insurance and know what is suitable for you. If you choose product advice option you are responsible for everything and you lose all rights to legal suit or compensation if the product you bought goes wrong,
ie the agents and the company are absolved from any liability.
I know many didn't choose this option but on the advice or threat from the agent. If it is so, you should report it to the company or MAS that your agent has advised you or frightened you into choosing this option. You have every thing to lose and you defintely lose because the agents who advised you to choose this option want to push you products that carry high commission and he or she cannot justify the suitability of the products.Very often the products are wholelife, limited wholelife, endowment, anticipated endowment aka cash back, coupon or dividend payout plan and regular ILPs and they carry high commission. The agents are pushing the responsibility to you and they disclaim laibility so they can earn high commission without having to answer you if the products are found to be not suitable or you found the products have poor return and low protection at high cost.
It is your right to responsible and competent financial planning.
It serves you well to consult FISCA before taking up any insurance. Or if you have existing insurance policies and wondering whether you were sold the right products and given the correct advice , you too can seek FISCA for review for mis=selling and conflict of interest.
Remember product pushing or selling is not putting your interest first and you are inevitably short changed and your needs compromised. Insurance agents push products because they want to earn high commission and fast at your expense.Don't fall into this trap.If your agents insist on product advice reject him or her or report to MAS.It is to protect yourself.
All the best.; June 10, 2010 9:50 PM
Anonymous said...: Yes, by choosing product advice you are legally giving up your rights to the company and the insurance agent is free from all blame. In other words it is Caveat Emptor. You buy with your eyes wide open. The insurance agents are happy and eager to push you any product, especially those with high commission .
Buyer beware... of what you do. The agents are not putting your interest first when they push products upfront to you.; June 11, 2010 9:17 AM
Anonymous said...: Your mother is wasting money on this product. In likelihood she was conned. The protection is definitely low and the return is worse than day light robbery.; June 11, 2010 10:08 AM