Five years ago, a Chinese educated woman asked for my help. She was persuaded by an AIA agent to invest $50,000 in a life insurance policy. He told her that she could earn much more than leaving her money in the CPF. She made the investment with her own savings (not CPF).
After making the investment, she received a regular statement showing that the value had depreciated a lot. She could not understand the statement. She asked the agent for explanation. He was evasive and difficult to reach.
A year later, she received a letter for AIA asking her to pay another $50,000. She asked the agent why she had to pay this additional sum. The agent told her to ignore the letter.
Afterwards, she was told by AIA's office that the policy had lapsed and is does not have any value now.
She approached me for help to get back her money.
I told her that she had bought an policy that required her to pay $50,000 in premium every year. She was shocked. She did not have the means to pay this kind of annual premium. All along, she thought that it was a one time investment that was supposed to give a return better than a bank deposit.
There are many people in Singapore who do not know the difference between a one time investment and a regular premium policy. Surely, AIA should have known that an annual premium of $50,000 is outside the reach of many people. Don't they care?
The policyholder's request for a refund of her premium was rejected. She was supposed to be aware of the policy that she had taken. I helped her to write two letters, in strong language, to be sent to AIA.
A few months later, she told me that the received the refund of her $50,000. I asked her to make a donation to FISCA. She asked, "how much?". I said "Up to you. Maybe $200, $500 or $1000". She gave me a cheque for $2,000. That was the most generous donation received by FISCA.
When I started out in my working life, I had several friends in life insurance, which in those days, was a highly lucrative career without professional qualifications like a degree and such. All that was needed was the gift of the gab and persistence.
ReplyDeleteI was closed out by two classmates. One sold me an endowment policy which upon maturity was not particularly profitable as its value was eroded by inflation especially in the last 3 decades. The second policy was a whole life plan and it turned out to be a dud too. Somewhere along the way I used the deemed proceeds to pay the premiums and eventually discovered I could surrender as fully paid for a reduced sum assured. Of course one should look upon insurance as protection first and investment second, and understand the protection part is a bell curve that rises as one heads towards middle age with family and responsibilities, and drops thereafter.
Thanks to your incisive and insider information on the workings of the insurance business I have advised my children not to make the same mistakes as I did.