Competing with the experts

When a consumer buys insurance, the consumer has the compete with the insurance experts, e.g. the actuaries, on what is a fair price for the insurance protection. The insurance company will naturally want to make a bigger profit, if they can, and will charge more to the consumer for the protection. There is no way that the consumer can compete with the insurance company as they have the statistics and the expert to do the calculation. The unwary consumer is likely to pay too much and get a bad deal.

The best protection for the consumer is:

• Deal with an insurance company that is pro-consumer, i.e. they will charge a fair price. An example is an insurance company that is not profit-driven. Today, it is difficult to find such a company in Singapore.
• Buy a standard insurance policy that is offered on similar coverages by several companies. The market competition will force the company to lower their margin and make a modest profit. Examples are term insurance, motor insurance, personal accident insurance and fire insurance.
• Avoid a specially designed product, under an exotic name, that is marketed to you by an insurance agent, adviser or consultant.  This applies especially to a life insurance policy that combines protection with investment of savings. You can be sure that this policy cannot be compared, and is likely to be highly priced to give a big margin to the agent and the insurance company.

Tan Kin Lian