Saturday, February 13, 2010

Achive top position in life insurance sales

Life insurance companies compete yearly to achieve the top position in life insurance sales. This is an indicator  of success and the productivity of the sales force. Several decades ago, the competition was based on annual premium on new policies, but in recent years, 10% of the single premiums are added to the annual premium to get the weighted premium as a measure of the sales.

To achieve sales and energize the sales agents, the life insurance companies introduce new and innovative products every year. These new products are variations of the old products, but have some changes to allow the agents to market the product. The variations may take the following forms:

a) a shorter period to pay the insurance premium
b) additional risks that are being covered
c) change from guaranteed to investment-linked payouts or back

As each new product is launched, the insurance agents have the chance to go back to the old customers and get the customers to terminate an existing policy and buy a new policy under the new product with the special features.

The customers are taken for a ride. They are not aware that the existing products give better value and that replacing the products is costly and against the interest of the consumer. In most cases, the consumer has to give up two years of premiums as upfront cost. The customers were also not aware they can buy separate insurance, at low cost, to cover any new needs. (I shall write separately on these matters).

Some insurance agents make a good living by replacing the existing policies of their customers every few years with the new "better" products, but making their customers poorer in the process. With the huge loses on the replaced products, the consumers are never able to accumulate sufficient savings for their retirements, even if they had been frugal.

An insurance agent can achieve the top sales position by making it possible for the sales agents to exploit the ignorance of their customers through the replacement of existing policies. The sales agents are happy with this arrangement, as they can earn high commission by selling the new policies, and it is easier to replace existing policies than to find new customers.

This bad practice of replacing policies, also known as "twisting" is made illegal in some countries. It is discouraged in Singapore, but the enforcement is weak.

An ethical insurance company will protect the interest of its customers by disallowing replacement of existing policies. An unethical company will make it easy for the sales agents to explot the ignorance of the existing customers to make new sales by replacing existing policies, and achieve the top sales position.

Tan Kin Lian


hongjun said...

And if sales target is met, they are eligible for a free trip to somewhere else.

Anonymous said...

As reported NTuc Income is headed to be the top insurer of 2009. But before jumping in to congrat the FT for a job well done or dubiously done let's analyse some figures.
In 2009 only 60%(doubtful) of the insurance salesmen submitted a full or partial fact finding . Ntuc agents have the distinction of submitting only 5% and that means 95% of the ntuc agents are super duper salesmen. This gives some clues as to how ntuc achieving the top sales production.
If you analyse the ntuc results the API has dropped quite substantially and it makes up less than 50% of the total.What does it tell? It says without the single premium and if it is based on API ntuc might be last in position. It is through weighted basis that it is pulled up to #1 , about $5 millions or $50 million unweighted, more than its closest rival. The next question is how did ntuc achieve the extra $50mills to beat the others. There are a number of reasons, leaked out, that helped ntuc to be number one.
First, as a strategy of last resort
ntuc pulled off by using the dubious capital plus exploiting the fear, risk averseness and ignorance of their policyholders to bring in a few hundred millions.
The agents' pitch and so is the company that capital plus is 'better than the bank'.This might be the reason MAS has banned the misleading use of this comparison very popular with ntuc agents.
It was disclosed in the last months the agents were urged, or whatever they must try to sell capital plus of $200K each agent and also many of the agents were encouraged by the FT to buy from $10K to $100K, with incentives or discount ,of investment.In this last minute spurt the sales might have tipped the scale in favour of ntuc.
The point here is why so desparate to be #1? What so great?Why resort to these dubious means? Everyone should know sales is indicative of sales results per se and doesn't say how many lives saved or lives helped. As for lives helped LIA has the evidence of under insurance and low claim , the so called noble work of insurance agents.
Is it that a big angpow awaits him at the end of the rod? or is it that beating his predecessor was his obsession ?so he could look smarter? What does it benefit the company and the agents? Is this where ntuc is heading , a sales oriented company? If it is , the future doesn't bode well for this social enterprise , a once cooperative company.
Insurance companies should not achieve market share at the expense of their clients based on sales. Like the mdrt awards it is very dangerous. It is open to abuses and malpractices and consumers' interest takes a back seat.The industry wasn't created for this purpose to let the insurance companies to make a lot of profits and to let the agents fleece their customers to achieve another dubious award like the mdrt.
The sole purpose of this industry is to help the consumers achieve their financial goals with the best products and the best advisory service and NOT being peddled and dumped useless products
that steal stealthily from them.Win-Win-Win is the goal.
There have been many cases reported when customers wake up after 20 years to find their policies failed to deliver as promised and caused panic to their financial future.Their time is stolen too becuase without time there will be no accumulation of funds or saving.
Is being #1 great when customers feel last? Is #1 indicative of the professionalism of the insurance agents? No!!! at best they are super duper sales men and women and at worst they are super dupers conmen and women when the yardstick is sales.
Beware of salesmen and women disguised as financial consultants.

Anonymous said...


Thank you for sharing. I think this is commendable because not many politicians in Singapore give their value or philosophy statement. I hope you are setting a precedence for them. Great.

Anonymous said...

Consumers must remember that newer products are NOT better than the old or existing products. In life insurance products get worser and worser becuase of increasing cost.
Just ask yourself, has your salary got higher and higher each year so are the workers of the insurance companies. To overcome this investment return must increase but it is uncertain. But if the risk of wholelife and endowment products go up then you are better off doing it yourself becuase you can get higher return and lower cost for protection.
EG.. ntuc recently restructured and lowered their annual bonus and told you to depend on special bonus is in effect telling you that the risk of their products has gone up.
Most consumers don't understand and they depend on insurance agents to recommend the products but insurance agents are salesmen and depend on commission they inevitably sell you a high commission product. So never trust insurance agents , male or female , they wolves and vixens in disguise.

Anonymous said...

Sometimes it is waste of time warning consumers of the scam features of so called limited payment wholelife critical illness plan like vivolife. These are views of experts and yet they go unheeded.
Limited payment wholelife is NOT new.
You can do the same to your old wholelife by converting to paid up and you stop paying premium but you are still covered but at a lower sum assured and your cash value continues to build up. You should not go for the limited scam product because the premium of the limited scam can buy you more double the sum assured and which you need most at a stage in your life. And when you cannot tahan paying premium because of loss of job you can convert and still covered.
Don't be fooled by this limited scam. Do you know you can even buy a wholelife critical illness in single premium? Can you afford ENOUGH OF IT? Insurance is about having enough to cover your risks at a point in time.
Consumers, be educated or at least trust independent opinion. eg, Mr. Tan has no vested interest. He wants to educate you so that consumers will not fall into the traps of insurance agents and the companies.

Anonymous said...

Mr. Tan, what about buy one to fund another one? Is it replacing or twisting? Example is buying revosave and use the coupons to pay the premium of vivolife after the second year.
Should I report to MAS? I didn't know until someone told me that there is no advantage for me except for the agent. I fell for the trick.

Anonymous said...

Being top in sales production means one thing and that is the insurance company has more conmen and women.
I remember one ad in the ST last year this company called their salesmen SUPER DUPERS SALES CHAMPIONS.I agree they are super dupers.Dupers are real good at duping people into doing something that benefits the dupers only.
A company that is obssessed with market share and did at the expense of the consumers is a despicable company.Be careful. Salesmen are well known and aka conmen, the precious magic stone con artists. Don't be fooled by the result.

Anonymous said...

I heard from ntuc agents ntuc played cheat to be #1. They dumped the market with a product called Capital Plus, a single premium.
The agents even misrepresented the product as FDs and used the 'better than the bank' comparison to misrepresent and prey on the kiasu, the risk averse policyholders. They didn't do well in the API category, in fact worse than the last year.
I heard MAS has outlawed the use of 'better than the bank' to bluff consumers.

Anonymous said...

"One critical issue that calls for an industry philosophy and position to be forged concerns the remuneration structure of representatives and to what extent is it true that traditional schemes tend to incentivise sales based on the adviser’s self interest rather than the customer’s need. "
Among the many issues the President of LIA addresses the above seems to be a naive statement.
I am very sure The LIA president can read and interprete the results of 2009 and the preceding years. It is very glaringly clear that the insurance agents never put the interest of their clients first but theirs. The 4thQ sale of 2009 again proves it and shows only a miserable sum assured of $55K was sold .What can contribute to this low sum assured you don't need to be an expert to conclude that it was due to self interest of insurance agents and the self interest is high commission products which consumers could not afford enough.If this isn't self interest then what is it? If this is not conflict of interest then waht is it? Customers interest has all these years taken a back seat despite the warning from many MAS luncheon talks to LIA.
The cause of conflict of interest is commission. Commission is universally known to be the evil behind all unethical practices and Singapore agents are no different.
If consumers want to see a fair dealing outcome commission must be removed and replaced by a more equitable remuneration structure.
For a start while looking for the fairer model, meantime all 3rd option or product advice option should be only remunerated 5% of the first year premium of a product. 5% commission should be a fair amount to compensate for the work for forms filling and execution.This should prevent insurance agents from dodging the fact find which very often it is blamed on the consumers. Not enough effort is done and agents always find the easy and lucrative way to peddle the products with high commission to the detriment of the buyers.
Before agents have any ideas those who pretend or fake fact finding must remember that they will be be held responsible for recommendation not on reasonable basis which breaches section 27 of the FAA.
Think twice if agents are thinking of circumventing this rule and if not careful they will be in hot soup and so is their supervisor.The fine is minimum $25K each with suspension or revocation of license.The CEO's neck too will find the sharp blade.
MAS must start licensing all insurance agents to stop company hoping . Also a register of all agents to be online for consumers to check their agents.
If MAS is serious the above is reasonable proposal and they will help to prevent abuses and unethical practices which the president of LIA seems to think there isn't.

The Watchman

Anonymous said...

I agree that product advice option whether initiated by the buyer or by the insurance agents who try to dodge fact finding should be rewarded for 5% of the 1st year premium of the product only. This is fair as the agents only provide form filling service and 5% is sufficient compensation for this service.
MAS should adopt this and make it mandatory for all insurance companies to follow. This is also a safeguard against agents using the clients as an excuse, ie, the clients don't want advice or refuse to disclose personal information.This is a lame excuse and the agents should not be allowed to hide behind this excuse and yet earn the full commission. I know product pushing agents using this as an excuse to peddle the high commission wholelife or endowment products without having to justify the sale as this is not their recommendation. The customers want it one, so say the agents.
MAS, if you are reading this do consider this when reviewing the commission issue.

Anonymous said...

Ntuc ceo mentioned cultural change, where got change? It is same old product pushing and in fact almost complete product pushing culture and for that ntuc earned the reputation of having the lowest submission of full or partial fact find and that makes the biggest product pushing insurance company in Singapore and this naturally translates into the #1 product pushing company for 2009.
If this is what the ceo is proud of he is certainly obsolete and stuck in his time after coming out of obscurity.

Anonymous said...

Whatever revolution the ntuc ceo is talking he means the external change of the building, new color(curry) and the rubbish products. As far as the insurance agents the only change is they push product harder and everyone is a salesman. This is the misuse of the word 'revolution .

Anonymous said...

First, I am a agent with P company.

After 6 years in this business, I decided to move on in life as its meaningless continuing my career within this "highly competitive" industry.

Agent "kill" one another and "backstab" clients in order to fight for their personal sales and achieved so call "top honour" It's such disgrace that many agents resort to unethical means to gain their different awards including the "Million Dollar Round Table" title.

Company keep throwing incentive to sell products to clients which give them the best profit margins yet at the same time ask agents to be compliant to MAS guideline, really isn't it ironic?

Its a thin fine line between top achiever agent and ethical agent. Those ethical agents will never make it big in this line and top achiever will never be ethical. Conscience really leave me with no choice but to leave this industry.

hongjun said...



Anonymous said...

Anon February 16, 2010 11:04 PM,

It doesn't happen in P company only it happens in ALL the companies but the worse is in ntuc where customers' interest is never considered in any deal. How to con them quick is. It is a sick industry. As you said agents are stealing from each other to qualify for mdrt and yet MAS is not doing anything. MAS is pretending, LIA is pretending while the consumers got raped in broad daylight. Look at the statements issued by them, they are as good as condoning the malpractices of insurance agents unlike their counterpart in UK. UK FSA is a no nonsense regulator and it comes real hard on the insurance companies and its salesmen. This is right thing to do becuase as sellers they know everything about the products but not consumers.Therefore, the FSA rightly takes the side of consumers and protect them.
MAS? it is still finding 'loopholes' or rooms for the insurance agents and the companies and the banks to malpractise.
The minibond saga is an eye opener for consumers that the financial industry is lawless and full of crooks and rogue agents.

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