Tan Kin Lian's Blog: High cost products

Monday, September 03, 2007

High cost products

TWO COMMENTS POSTED IN MY BLOG (edited)

Examples of high cost products are limited premium critical illness plans, repackaged endowment like REVOSAVE, whole life plans and regular ILPs like ID2 and other s from other insurance companies, high expense ratio ILPs.

They have high distribution cost with part of it which goes to agents as commission. Because of high cost the return is affected.

-----------------------------------------------------------------------

Since the critical year saga the insurance companies were rolling out products with limited premium on the premise that customers do not like to pay for life.

The question one should beg is "is it to the benefit of the customers"? The answer is yes and no. Yes, it benefits the high earners and the rich without their compromising their needs for high coverage. The rich never have this problem of servicing the premium.

For the poor it makes it even worse for them. Before this they were already struggling with the premium for a normal wholelife. Now the premium is even more menacing for them. Lapsing seems inevitable, just a matter of time. Why then insurance salesmen still recommend limited premium to the average income customers?

I am sure if they have done fact finding limited premium would never been recommended. As I have said insurance salesman is a salesperson. He sells with one objective, ie. to close the sale.

Does the agent bother whether the customer continues the premium for the next 20 years? He has collected the huge commission and if the customer should lapse he can sell him another one with high commission, an opportunity to make a sale.That is good strategy.

So what should be done to this type of insurance salesmen?

6 comments:

Anonymous said...: Revosave is promoted as some flexible plan with many options which can be exercised yearly.Wonder which customer would be making this exercise every year? It is troublesome and does not give any special benefit. I can foresee this feature will not be much used and therefore becomes a useless feature.
Who will be so fickle minded to switch from one option to another?
Doing this dilutes and aggravates the plan. Whose circumstance changes so often?
My guess is only the fickle minded would do and who do not have goals.
Perhaps Revosave appeals to this group of customers, maybe women, whose whims and fancies are forever changing.
Those with concrete goals will not buy this plan because buying the features seperately yields better return. Example, a simple endowment gives better return by as much 25%.
The Revosave has high charges so that it can pay high commission to the agents. This erodes the return.
Revosave is not recommended unless you have no definite goal and are fickle minded and have hazy and ever changing goals.; September 03, 2007 6:43 PM
Thomas Phua's Blog said...: I hear from sources that the REVOSAVE was actually designed during Mr Tan's term as CEO.

Perhaps Mr Tan can tell us why it was not introduced to be sold during his time and after he retired, it was promoted as a good flexible hybrid plan?; September 03, 2007 10:12 PM
Khiat Han Hwee Adrian said...: When ones do not make any choice, the cashback is put into investments by default.
It might be a blessings in disguise when the person do not make any choice over the whole term of the policy.; September 04, 2007 3:50 PM
Anonymous said...: Buying from insurance agents depends on luck. You might be lucky that the products meet some of your needs.
You will be sorry to find out 20 years later that you bought the wrong product or not enough of the product.
Indeed, it is a gamble buying from insurance salesmen or women.
Too bad if customers insist on buying from them. Who is to blame?; September 04, 2007 11:12 PM
Thomas Phua's Blog said...: This company that did not honour the critical year plan is now promoting in big way their concern for people to do Financial Health Check.

What else will they see after the check, another critical year plan?

Their Choicelife also gives no choice when the limited year arrived, as the reason is yield is too low in today's environment.

This company claim to be International insurance company and they continue to win the trust despite all these happening past few years.

I wonder why people never learn about this company A.; September 12, 2007 9:17 PM
Anonymous said...: People never learn and the companies and their agents also know that.That is why they can continue to bluff the people.
They can continue to bluff the customers with all sorts of complicated products that are useless in any sense and with cool names. With the help and collaboration of the insurance agents they scheme to decieve the customers to enrich themselves. The insurance agents play the lead role going out into the field there in search of victims and suckers to suck. The companies A.P.I. are the worst companies.They are the fire that will gut your financial home.; September 14, 2007 12:42 PM