Saturday, October 12, 2013

Be careful about low cash values

A bank marketed a life insurance policy where the consumer has to pay $10,000 annual premium for 5 years, making a total payment of $50,000.
At the end of 10 years, the policy pays between $55,000 to $61,000 (not guaranteed) giving a yield of about 2% p.a.
The surrender value before maturity is less than $35,000 (as against $50,000 in premium paid) and this is not highlighted to the unwary consumer - although it is shown in the benefit illustration.
A consumer said that the product was sold to her as a saving plan, and she was not told that this is a life insurance policy. There is suspected mis-selling.

When I showed this policy to an independent financial adviser, his comments are:
1. This is a rip off product
2. How can MAS allow the insurer to sell such a product? How does it pass the compliance test of being fair to consumers?

7 comments:

zhummmeng said...

They all have lost their conscience .They suck the blood of their fellow humans for the sake of money. What do they care? They are no different from the drug traffickers .

zhummmeng said...

You get better deal from IFA than from tied insurance agents who can only recommend their company's products, good or bad and even rotten ones. Be careful of tied agents, they will lie and con you into beleiving their products are the best although they are not.
Only IFA can give the best, but also be careful of them too, especially the greedy ones who will sell you the products that carry incentive bonus/overseas trips for sale of these products.Thank MAS, soon this will be banned too.

william said...

Mis-selling or misrepsentation may be, but these days the principle of buyer beware applies to everything - caveat emptor!

Rip off product? Which insurance, annuity, saving or investment fund give you back more than what you put in without risks? They are all meant to be held over "long term" or till maturity before you can get any guaranteed returns if you are lucky to get any. Even bank fixed deposits come with a penalty for early withdrawal, there is no free lunch!

If MAS were to regulate there are many things out there that needs to be regulated, then people in the industries will complain because it affects their rice bowl.

Perhaps Mr Tan's IFA friend can advise what is not a rip off product that he would recommend generally. Please don't say it all depends on individual's financial needs but give an opinion on whats a decent retirement saving plan with or without some insurance element, besides CPF LIFE.

Thank you.

william said...

I wish to add to my earlier comment that CPF LIFE does not provide any insurance element, it simply lengthen the payout period beyond 20 years at a lower monthly payout. How many people will live beyond 85 given the pace of life today?

zhummmeng said...

The changes at a glance next year and 2015 for the insurance industry.
1.The public can buy basic life insurance directly,eg term, wholelife and endowment, without having to pay commission but only a nominal fee to fill up the forms.
Isn't this what your beloved and so called trusted agents have done for you? Why pay the agents high commission to fill up the forms?
2.You can compare the products and buy the best products by relying on the online web aggreggator by MAS. Now you can see for yourself all the products of different companies wihtout relying on the lies and BS of your insurance agents.
3.If it is approved the agents who harrass you at the roadshow will have to give you a cooling period to seek second opinion and no more high pressure to make you sign on the dotted lines ON THE SPOT.
4.Best of all, ALL insurance agents/advisers will have to give minimum standard of good advice or risk having their commission clawed back...this includes their supervisors who will suffer bigger cut or completely lose their over riding commission....eg..fact find and analysis show client needs $1million coverage but recommended a $50k critical illness whole life plan will suffer a 100% claw back in commission for agents and their supervisors because the recommended product is NOT suitable.
NB..more to come and eventually the fee based advisory service and not product trafficking approach.
These are your rights to responsible and honest financial planning.

Marc Wong Tian Jun said...

zhummmeng: when next year will this be implemented?

zhummmeng said...

to Marc,
the no commission direct channel will be implemented on June 2014 and the comparison web aggregator at end of 2014.

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