Friday, November 12, 2010

But agents exert powerful sway over buyer's choice

Published in the Straits Times


SENIOR Minister Goh Chok Tong's observations about keeping life insurance coverage affordable
focused on the conventional practice of recommending whole life or savings plans instead of term insurance ('Keep insurance affordable: SM Goh'; Oct 23).

This practice is evident in a finding published by the Life Insurance Association of Singapore, which stated that Singaporeans are under-insured by 67 per cent, or by as much as $329,223 based on average household expenses; when term insurance is, by contrast, far more affordable.

One aspect of Mr Tan Kin Lian's comments on Wednesday ('Two key factors insurance buyers don't know') describes the inherent conflict of interest between a fatter commission and the consumer's immediate protection needs.

Usually, if a proper financial needs analysis is done prior to making the sale, a buyer's required insurance protection may well amount to hundreds of thousands of dollars. Instead, what usually happens in an insurance sale is that the recommended products, while meeting the buyer's budget constraints, do not satisfy his protection needs.

In fact, private bankers or insurance agents who sell savings plans with embedded insurance protection often use the savings elements to attract and keep consumers to a long-term commitment of their budget, thereby depriving them of a future budget for protection needs and giving them the impression that insurance protection is costly.

If responsible advisers recommend term insurance, consumers can easily meet coverage needs without resorting to high-premium, low-coverage products like whole-life or endowments.
Last Friday's reply by Mr Jeffrey Tan, president of the Insurance and Financial Practitioners Association of Singapore ('Choice of insurance plan hinges on affordability, buyer's needs'), omitted an agent's powerful influence on the client's choice.

There are three ways to better police recommendations:
* Agents should be trained to offer needs-based advice rather than just product advice.
* Conduct compliance checks on an agent's recommendations to meet protection needs; and
* Check whether a client who picks a savings plan over protection needs has been given a booklet which tells him about the benefits of term insurance within the free-look period, so he can reconsider his choice.

Brendan Yong
http://www.straitstimes.com/STForum/Story/STIStory_602320.html
Posted by at

5 comments:

DareToAct said...

1. Look at the advertising budgets of the industry versus the budget allocated to investors education.
2. Look at the number of people in malls (real or window shopping) versus the number of people staying home reading about financial matters.
3. Look at the amount of research materials available on stuff (eg, iPad) versus research materials available on insurance.

November 12, 2010 12:27 PM
jovan said...

reply to accordance to the letter on point 1 & 2.

point 1. a tough call if they are all "tight agent" unless the agents are all independent however I dont forsee this happening anytime soon at all. A very tough call indeed

point 2. a check to check if the recommendation is proper? I guess when it comes to profit I dont see any improvement where we all know the BIGGEST profit between term and whole life. Another tough call...

November 12, 2010 6:51 PM
Vincent Sear said...

Frankly, if I want to take up a policy or am prospected by an agent, I wouldn't fill up the fact finding form even if I want to buy. I'd want to be shown a range of products, then I consider and choose myself. I won't tell the agent intimate details of my finances and budgets except just enough to justify the policy size.

I think that regardless of levels of financial literacy, most people still do that. Financial privacy is held dear and close to chest.

Insurance is sold, not bought. It's not like a man with money or needs money looks for a bank, a man with illness looks for a doctor or a man in trouble with the law looks for a lawyer. The majority gets on with life without giving a thought to insurance.

The agent's first job is to find prospects willing to listen. Rejection rate is very high. Second to convince prospects the need for insurance. Rejection rate is very high. All these cost the agent time and money, since there's no basic salary.

If being an agent is so lucrative just by filling and submitting forms, why are managers and supervisors struggling with recruitment? If agents hold sway over clients, why is rejecting agents a national past-time for those walking past MRT or shopping mall roadshows, receiving cold calls and even knocks on the door?

November 13, 2010 9:10 PM
zhummmeng said...

Vincent Sear,
I find rebutting your argument is a pleasure to me because your argument is very flawed. And from your reasoning you are neither an insurance agent nor you are insurance or investment savvy , from both aspects your views are dangerous.

1. you won't want to be fact find -ed and that puts you as savvy.You don't need to wait to be prospected. If you wait to be prospected means you don't know what you need,ie you are NOT savvy and that means you are member of a cohort known for not knowing what they don't know but pretend to know.
2.How much 'intimate' details to disclose depends on what you are addressing.It is well known that people are afraid to disclose because they have nothing to disclose to avoid embarrassment.If the customers are truly concerned about about their needs they willingly disclose everything needed to be disclosed BUT only to a qualified and honest adviser and not to a salesman, of course.
3.Anyway, a newly minted law will come into force next year to deal with customers who pretend to be savvy or really savvy customers.
4.You also contradicted yourself or rather confessed unknowingly that you are NOT savvy when you said that ' insurance is sold and not bought'.Savvy customers buy and clueless customers wait to be sold.
5.The reason why insurance agents need to prospect is because 99.9% of customers are clueless, ignorant or in a state of coma awaiting to be awaken.This is a fact. And once awaken they become easy prey to predatory insurance salesmen who would con them into buying big commission products.Some of these customers deserve it. LIA statistics bear this evidence. Maybe , Vincent you belong to the 0.1% who are weary of insurance salesmen but missed out the financial planners
6.Which job allows you to prospect your victims? can lawyers or doctors prospect their cleints in the mall, mrt or pry the streets for victims? Insurance salesmen with tikam tikam certs can do but lawyers with 4 years of study or doctors with 6 years have to wait in their office or clinic for their victims to walk right into their traps?
7.Yes, filling up forms and submitting forms is all waht they do and yet they earn thousands of dollars for doing that. What about the doctors and the lawyers? Do they get paid so much for writing prescription or drafting a legal letter?
For a salesman with only 4 'O' levels and some tikam tikam certs to earn a few hundred thousands a year is not lucrative then they should be robbing the bank instead of robbing the poor man in the street.
8.All the time spent and what they go through don't add value to the customers, why should they be paid for that? High rejection is because the salesman make 'suay' of themselves for their incompetence and unethical practices and public perception of them as such.
My advice is know what you don't know and this will be the beginning of your wisdom.

November 14, 2010 12:00 AM
Vincent Sear said...

I don't claim to be wise. If it's my money, I decide what to do with it according to the capacity of my faculty. Thanks for your concern.

If it comes the day, buying insurance or investment in Singapore needs to protected to such an extent as all personal incomes and assets must be declared, then I don't buy or look abroad to buy. Simple as that.

You're so concerned about my and others' financial well-being. I thank you for that but I'm sorry, I can't reciprocate that concern to you. It's your money, not mine.

November 14, 2010 8:55 PM

Post a Comment

Subscribe to: Post Comments (Atom)

Blog Archive