Published in Straits Times
I AM curious about Mr Tan Kin Lian's ardent advocacy of term insurance
over whole-life and investment-linked plans
('Two key factors insurance buyers don't know'; Wednesday) in his reply
to Insurance and Financial Practitioners Association of Singapore president
Jeffrey Tan's letter
('Choice of insurance plan hinges on affordability, buyer's needs'; last Friday).
When Mr Tan Kin Lian was the chief executive officer of NTUC Income for 20 years,
he endorsed the sale of thousands of whole-life and endowment policies
and investment-linked plans (ILP).
He isn't quite right when he states that agents prefer selling whole-life plans
instead of term insurance because they can earn significantly more commission.
Policies are usually sold and bought based on a client's budget limit
rather than the sum assured.
An agent earns the same commission for a term plan
that charges a monthly premium of $200 a month
as he does for a whole-life policy or ILP with the same premium.
Most buyers also prefer whole-life and ILP over term insurance
because they do not believe they will ever need to claim on their policy,
especially for critical illnesses, and want to get their premiums back.
Almost every client of mine asks me how he can retrieve his premiums
if nothing happens to him.
Mr Tan Kin Lian inflates the commission an agent earns.
If agents earn as much as he thinks,
recruitment shouldn't be an insurance manager's biggest headache as it is now.
Mr Tan is also wrong
when he states that distribution costs are paid to agents for the advice they give.
Distribution cost, as the name suggests, is commission paid for selling the product
and is not an advisory fee.
An agent is paid according to the amount of money he brings in.
To offer an analogy, a doctor's charge for consultation
is separate from the income he earns through selling medicine in his clinic.
In the agent's case, the consultation is free.
It is not the agent's fault if a customer needs more cover.
Mr Tan Kin Lian's one-policy-fits-all-needs solution
does not help clarify the different insurance requirements of buyers.
Gideon Lee
My comments
I hope that some consumers will write to the Straits Times to show how they have been misled by insurance agents into buying the bad financial product.
I will be writing a reply to the points raised by Gideon Lee.
11 comments:
Mr Tan, you have struck a nerve with those self-centered insurance agents and companies. Please continue your efforts, should not led them mislead ST readers with such lies and half-truths.
I think the writer was trying to kill the message (term insurance is better) by killing the messenger (TKL) in a subtle way.
During my younger days when I was quite financially ignorant, I bought NTUC and AIA whole-life policies. I was able to surrender the NTUC policy (bought during Mr Tan's era) with profit after 10 years. I am still losing money in the AIA policy even after 15 years. Although I still prefer term insurance, the NTUC whole-life policies under Mr Tan were not as terrible as now.
Below is an entertaining video from Suze Orman (google her name if you don't know her). See her reaction to whole-life insurance. It reminds me of my wife's "friend".
http://www.youtube.com/watch?v=6vnN9liFWaE&feature=related
Instead of talking in general terms, can both sides provides some concrete data to illustrate the case. I am sure with data, things would be much clearer. My personal talk is that I am more agreeable with Mr Tan.
Gideon : You can prove us wrong by showing us some data. Thanks.
It really infuriates me when I see this kind of explanation. Insurance is not investment. Insurance is protection in events of risk. As simple as that. I mean what is wrong with these agents....??? Do they feel good selling these type of policies? I mean you can't earn all the $$ in the world. Live with good conscience please.
The agents' pockets are now being hit hard and that is why they become incoherent..Seow liao!!!!!
Wonder why customers should pay the commission if it is the customers who decide and want the products? They are the savvy ones. They don't need the agents rubbish advice. Why should they pay? MAS must mandate insurance portals to sell directly to savvy customers who know what they want...
I mentioned many times before insurance agents usually give this "the customers want it,wah" reason or "the product got saving, hor" reason when they push high commission products and customers don't even know whether they buy the right products so long their 'budget' is met.
MAS must act on this and do something about the greed and unethical practices of insurance agents.
Mr Tan, maybe you should get the media to feature your points in Sunday Times under financial. Agents have to face the fact that gone are the days you can dictate this to your client to buy. We need to have client interest first rather than commissions, please bear that in mind. So what if a client buy SAFRA Term and I do not receive any commissions. To me I have done justice and cater to my client immediate needs.
I think there's no one-size fits all buy term and invest the rest for everyone. Some people don't want to or can't manage investment portfolios themselves, but they want insurance cover with returns at certain stage of their lives.
The questions are upfront costs and eventual returns. If these are fully explained, realistically projected, and the client finds it acceptable, then I don't think the agent has done anything wrong.
As for particular product pushing regardless of client needs, it's not all the agent's fault. The agent is pressured by the supervisor and the supervisor is pressured by the manager and the manager is pressured by marketing policies, campaigns, incentives, quotas, carrots and sticks etc. set by the senior management.
The unethical agents are those who mislead clients for overselling and churning. Anything more than that, I think the agents aren't only unethical, but criminal too.
Anyway, I think the industry cannot be full professionalised as long as there're practices such as free gifts to clients for buying certain amounts of certain policies and free trips or events for agents hitting certain quota.
I think there's no one-size fits all buy term and invest the rest for everyone. Some people don't want to or can't manage investment portfolios themselves, but they want insurance cover with returns at certain stage of their lives.
1A..buying term and invest the rest has many variations and IT IS NOT ONE SIZE FITS ALL.. IT IS BEST FOR EVERYONE including the rich.
WL is ONLY suitable for the rich if it is for legacy.
Who says it is the customer who has to invest and manage himself? Why DIY when you can engage a qualified and honest financial planner?
At what stage of their life is insurance and return needed? Be more specific. What I know is , at every stage of their life there MUST be ADEQUATE coverage according to their needs. Return of wholelife is negative if WL is taken up at late stage of the clients' life.In fact WL has negative real return even after 40 years.So is it sane to buy WL?
The questions are upfront costs and eventual returns. If these are fully explained, realistically projected, and the client finds it acceptable, then I don't think the agent has done anything wrong.
2A: the customers are all clueless. How do they know whether the premium is reasonable for the sum assured? and the return is NEVER told to the client. Are client FULLY explained and told EVERY detail, FULL disclosure? So long they don't do all this they are all guilty of concealment, telling half truth and probably half lies.
As for particular product pushing regardless of client needs, it's not all the agent's fault. The agent is pressured by the supervisor and the supervisor is pressured by the manager and the manager is pressured by marketing policies, campaigns, incentives, quotas, carrots and sticks etc. set by the senior management.
3A: It is NO DEFENCE for the malpractice. The agent should report to MAS and get the CEO sacked, fined and a jailed. What is the whistle blowing channel for ?
The unethical agents are those who mislead clients for overselling and churning. Anything more than that, I think the agents aren't only unethical, but criminal too.
4A: Not only that . Also failing to comply with section 27 of the FAA is a breach of the law.Soon this failing can land an agent in hot soup.
Anyway, I think the industry cannot be full professionalised as long as there're practices such as free gifts to clients for buying certain amounts of certain policies and free trips or events for agents hitting certain quota.
5A: The insurance agents have never been professional. They are salesmen and women. MAS must act against them.
Zhummmeng, I'm neither pro- nor anti-agent. I have one more point to add. Even in buy term and invest the rest, there's risk of mismatching and mis-selling.
For example, a client buys term and was somehow convinced to invest in a single unit trust or share, his future lives or dies by it. To diversify then, yes, it requires some management, whether DIY or using financial planners.
Big round back to square one. Are the financial planners ethical or even competent? We've been through the minibond crisis that has nothing to do with insurance agents already. Let's be fair.
Then, you are not smart enough to get a right advsier to help you. You got an insurance salesman.What do insurance salesmen know about investment or insurance? From your reasoning you don't look savvy about what you are writing.
These salesmen from the banks or insurance companies come under the same law,ie the FAA.They all hold the same license.
Zhummmeng, so actually, we've agree on the need for competent and ethical intermediaries, and the need for the client to be able to choose one. One point though, insurance agents don't sell minibonds, whatever licence they hold. I don't claim to be savvy.
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