For a long time, I have been advising consumers not to buy the rider to cover the deductible under the integrated plan.
Here are my reasons:
a) Assume that the chance of a claim is 1 in 10 years and the deductible is $3,000, the true cost of the rider is $300. But the insurance company has to load by at least 50% to cover the marketing and administration cost. So, the customer has to pay $450.
b) To make matters worse, some of the policyholders will be making excessive claims, as it is being covered. So, the actual cost will be higher than $450 to cover the inflated claims.
When I was running an insurance company, I had advised the policyholders not to buy the rider. I told them to self insure this risk.
Guess what? Most policyholders disagree with me. They do not feel comfortable about taking this risk, even though it is small. They insist on buying all the insurance that is available.
If I do not offer the rider to cover the deductible, they will probably go to another insurer. So, I have to offer this rider to meet the market demand, even though I advised against it.
Even well educated people cannot see the logic of my advice. They insist on getting full cover.
Over the past years, the cost of the integrated plan, including the rider, has gone up by a lot. Some people complained that the premium increased by more than 10% a year for many years.
Well, I did warn them. But they do not want to listen to my warning. So, they are now in a dilemma.
Tan Kin Lian
Here are my reasons:
a) Assume that the chance of a claim is 1 in 10 years and the deductible is $3,000, the true cost of the rider is $300. But the insurance company has to load by at least 50% to cover the marketing and administration cost. So, the customer has to pay $450.
b) To make matters worse, some of the policyholders will be making excessive claims, as it is being covered. So, the actual cost will be higher than $450 to cover the inflated claims.
When I was running an insurance company, I had advised the policyholders not to buy the rider. I told them to self insure this risk.
Guess what? Most policyholders disagree with me. They do not feel comfortable about taking this risk, even though it is small. They insist on buying all the insurance that is available.
If I do not offer the rider to cover the deductible, they will probably go to another insurer. So, I have to offer this rider to meet the market demand, even though I advised against it.
Even well educated people cannot see the logic of my advice. They insist on getting full cover.
Over the past years, the cost of the integrated plan, including the rider, has gone up by a lot. Some people complained that the premium increased by more than 10% a year for many years.
Well, I did warn them. But they do not want to listen to my warning. So, they are now in a dilemma.
Tan Kin Lian
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