Choice of insurance plan hinges on affordability, buyer's needs

Published in the Straits Times

WE REFER to the recent discussion
(Mr Tan Kin Lian,
 'Why insurers, agents may turn a deaf ear to SM Goh's appeal'; Oct 27)
on Senior Minister Goh Chok Tong's appeal to the insurance industry
('Keep insurance affordable: SM Goh'; Oct 23),
and would like to share our views on
term insurance versus traditional whole life and investment-linked plans.
Such plans and their suitability are largely dependent on the consumer's
financial needs as well as affordability.

Term insurance, which charges cheaper premiums, does not offer any cash value.
Such plans are often temporary solutions to permanent whole life plans.
Most term life plans do not offer coverage beyond the age of 85.

Traditional whole life plans, on the other hand, offer bonuses -
albeit non-guaranteed, but which become guaranteed once declared -
that will be added to the basic sum assured.

Investment-linked policies offer more flexibility and transparency
as to how cash values are accumulated.
As it involves investment, it is not suitable for risk-adverse consumers.

Not all term insurance policies pay a lower commission
than traditional whole life and investment-linked policies.

Pricing of insurance products is a matter of actuarial science
determined by insurers.

There is documentation of the financial planning process that is signed off by the client.
The recommendations based on the fact-find are further checked by managers
for compliance and can be audited by regulators.
Financial representatives subject themselves to mandatory training hours
in compliance, knowledge and skills,
while disciplinary actions are taken to address unethical practices.
The Life Insurance Association's report released on Aug 5 stated that
72 per cent of life insurance applications were completed
with a full or partial fact-find.

Ultimately, consumers would have to decide for themselves
on the advice given as well as the option to compare and choose plans
across the various insurers.
The answer to SM Goh's appeal should be multifaceted,
whereby insurers, industry players and financial representatives
work to educate consumers on the importance of adequate insurance coverage.
Examples include MoneySense and public forums.

Jeffrey Tan President Insurance and Financial Practitioners Association of Singapore
http://www.straitstimes.com/STForum/Story/STIStory_599561.html

My view
My consumers have sought my advice on the insurance policies that they have bought. They were shocked to learn about the high dedction, amounting to more than 50% of the accumulated premium. They were not aware about the high charge as it is not explained by the agent.

I hope that these consumers will write to reply to the letter from Jeffrey Tan. Consumers who have been cheated should now voice their unhappiness. They cannot stand on the sideline and expect other people fight for them.

If you wish to write a letter to the St Times but is not confident about how to write the letter, you can send a draft to kinlian@gmail.com. I will help you to polish up your draft. You should talk about how you were sold a life insurance policy, and how much you understood or did not understand the product, and how shocked you were to learn about the high percentage that is deducted from the policy, giving you a large loss for a lifetime.

Do take this chance to write, and help to change the bad practice and dishonest selling that is happening for a long time in the life insurance industry.