A insurance agent, an administration clerk and their manager are walking to lunch when they find an antique oil lamp. They rub it and a genie comes out in a puff of smoke. The Genie says, "I usually only grant three wishes, so I´ll give each of you just one."
"Me first! Me first!" says the admin clerk. "I want to be in the Bahamas, driving a speedboat, without a care in the world." Poof! She´s gone.
In astonishment, "Me next! Me next!" says the sales rep. "I want to be in Hawaii, relaxing on the beach with my personal masseuse, an endless supply of Pina Coladas and the love of my life." Poof! He´s gone."
OK, you´re up," the Genie says to the manager. The manager says, "I want those two back in the office after lunch."
Moral of story: always let your boss have the first say.
Wednesday, August 13, 2008
Honesty and business ethics
Is your insurance agent honest? Is your insurance company trustworthy? Do they observe ethics? Read about my comments on business ethics in:
http://theonlinecitizen.com/2008/08/business-ethics-%e2%80%93-honesty-while-making-profits/#comment-17387
http://theonlinecitizen.com/2008/08/business-ethics-%e2%80%93-honesty-while-making-profits/#comment-17387
Effect of Deduction
Dear Sir,
I have an enquiry to make regarding the Effect of Deduction after reading your blog. I took out my policy and I am pretty stunned to see the amount that is written under the effects of deduction.
My annual premium is $3,000 and assuming that I live till 65, it will be a full 44 years. I was 21 when I signed the plan.
Looking at it, Total premium paid is $132,000, total distribution cost is $5468, Non-Guaranteed Cash Value at 5% is 205,600 and at 9% 691,800. Effects of deduction is $882,776. I was not told about the effects of deduction when I signed up the plan and looking at it, I am pretty much being shortchanged for the amount of money that I put in.
Kindly advise on what should I do.
REPLY
You can write a letter of complaint to the deputy managing director in charge of market conduct in MAS, as shown below.
http://app.sgdi.gov.sg/listing_expand.asp?agency_subtype=dept&agency_id=0000008384-
The agent has a duty to disclose and explain this important point to the policyholder. It is shocking that the Effect of Deduction is higher than the Cash Value (assuming an investment yield of 9%).
I have an enquiry to make regarding the Effect of Deduction after reading your blog. I took out my policy and I am pretty stunned to see the amount that is written under the effects of deduction.
My annual premium is $3,000 and assuming that I live till 65, it will be a full 44 years. I was 21 when I signed the plan.
Looking at it, Total premium paid is $132,000, total distribution cost is $5468, Non-Guaranteed Cash Value at 5% is 205,600 and at 9% 691,800. Effects of deduction is $882,776. I was not told about the effects of deduction when I signed up the plan and looking at it, I am pretty much being shortchanged for the amount of money that I put in.
Kindly advise on what should I do.
REPLY
You can write a letter of complaint to the deputy managing director in charge of market conduct in MAS, as shown below.
http://app.sgdi.gov.sg/listing_expand.asp?agency_subtype=dept&agency_id=0000008384-
The agent has a duty to disclose and explain this important point to the policyholder. It is shocking that the Effect of Deduction is higher than the Cash Value (assuming an investment yield of 9%).
Pro Trader (Trading of Financial Products)
This website allows you to practice your trading skills:
http://tankinlian.com/trader/
You are given simulated prices for 4 financial products which change in response to economic news. You can buy or sell up to 10 contracts of these products. You will see your gain or loss each second, as the prices change.
You have to register an account and select the single player mode. There are instructions for how to trade. You can play the multi-player game and compete with other players.
All the best.
http://tankinlian.com/trader/
You are given simulated prices for 4 financial products which change in response to economic news. You can buy or sell up to 10 contracts of these products. You will see your gain or loss each second, as the prices change.
You have to register an account and select the single player mode. There are instructions for how to trade. You can play the multi-player game and compete with other players.
All the best.
Tuesday, August 12, 2008
Opt out of Eldershield
Dear Mr. Tan,
My wife received an "opt out letter on Eldershield" from Great Eastern. She is not a customer of Great Eastern. How did Great Eastern get her particulars? Is it fair to apply "opt out", especially to people who are illiterate?
My wife received an "opt out letter on Eldershield" from Great Eastern. She is not a customer of Great Eastern. How did Great Eastern get her particulars? Is it fair to apply "opt out", especially to people who are illiterate?
REPLY
The Ministry of Health makes it mandatory for everyone reaching age 40 to be covered under Eldershield. This is provided under the Eldershield legislation. Although it is compulsory, the insured person has the right to opt out. If they do not opt out, they automatically join the scheme and the premium for Eldershield is deducted from Medisave.
The Ministry divided the people reaching age 40 into three groups and passed them to the three participating insurers, namely Great Easter, Income and Aviva. Your wife is probably in the group that is given to Great Eastern by M of Health. This is how Great Eastern got her particulars.
When Eldershield was first introduced, about 35% of the people opted out, as they found the premium to be too high, relative to the benefits. The opt out rate has fallen (but I do not know the current level today). I have not analysed the premium and benefit recently, so I am not able to give an opinion if it is worth joining Eldershield.
The Ministry divided the people reaching age 40 into three groups and passed them to the three participating insurers, namely Great Easter, Income and Aviva. Your wife is probably in the group that is given to Great Eastern by M of Health. This is how Great Eastern got her particulars.
When Eldershield was first introduced, about 35% of the people opted out, as they found the premium to be too high, relative to the benefits. The opt out rate has fallen (but I do not know the current level today). I have not analysed the premium and benefit recently, so I am not able to give an opinion if it is worth joining Eldershield.
Monday, August 11, 2008
Insurance agent does not tell the truth
Dear Mr. Tan,
I met an insurance agent on the street, and was introduced to their "savings" plan. I read through your website and understand that such a policy is called a regular premium ILP policy, which provides life insurance cover and also an investment portion.
The agent told me about the "percentage that is allocation for investments", which is described as the distribution cost in your website. She did not mention anything about this percentage as being a cost.
I asked her what is the minimum amount and number of years needed for the plan. She said that the life insurance policy portion of the plan will need a minimum amount of $100 per month and take 13-15 years just to break even, and I understand from your website that this means the company has high expenses.
I told her I could buy term insurance and invest the rest in index funds and get better returns based on what I read from newspapers. Also, I told her that I understood that the commission she gets from selling ILP/life insurance policies is more than what she would earn from selling term insurance policies.
She said for the investment portion, the cost is 1-1.5% per annum. I asked her if her commission and other expenses are included, what is the total cost like ?
She said she was unable to tell me the figure.
She then introduced a medical insurance plan which she said enhances cover for Medishield, as its coverage is very low.
I asked her to provide me a copy of the terms and conditions for the earlier ILP Policy and the medical insurance plan. She said she would only provide me the benefits illustration (with terms and conditions) for the medical insurance plan.
Questions:
1) The agent said that the commission she gets from this ILP policy or a term insurance policy is the same (50% in the first year). I did not ask her the percentage for the subsequent years. In the end, she did not introduce any term insurance policy to me (although she said she also sells them) , which I had at least shown some interest in.
Does this mean she is dishonest or does the insurance company earn much more from the ILP policy than the term policy (and she earns the same from both) ?
2) What do you think of this insurance agent ?
3) I had in the past encountered insurance agents from the same company selling this type of ILP policy at least 4-5 times on the street during their roadshows. I understand other companies do sell the same thing too, but they are much less aggressive and seem to organise very few roadshows compared to this particular company.
What is the reason for this ?
This has become very irritating to me, and I would try to avoid this company once I see them from afar.
REPLY
I believe that this agent is dishonest and is not looking after the best interest of the client. Unfortunately, this type of behaviour is typical of most insurance agents from most companies. It is a sad state of affairs.
I hope that clients like you, are willing to write to the MAS and tell them about the real behaviour of insurance agents. If MAS acts against the dishonest agents, it may improve the situation and make the agents more ethical.
I met an insurance agent on the street, and was introduced to their "savings" plan. I read through your website and understand that such a policy is called a regular premium ILP policy, which provides life insurance cover and also an investment portion.
The agent told me about the "percentage that is allocation for investments", which is described as the distribution cost in your website. She did not mention anything about this percentage as being a cost.
I asked her what is the minimum amount and number of years needed for the plan. She said that the life insurance policy portion of the plan will need a minimum amount of $100 per month and take 13-15 years just to break even, and I understand from your website that this means the company has high expenses.
I told her I could buy term insurance and invest the rest in index funds and get better returns based on what I read from newspapers. Also, I told her that I understood that the commission she gets from selling ILP/life insurance policies is more than what she would earn from selling term insurance policies.
She said for the investment portion, the cost is 1-1.5% per annum. I asked her if her commission and other expenses are included, what is the total cost like ?
She said she was unable to tell me the figure.
She then introduced a medical insurance plan which she said enhances cover for Medishield, as its coverage is very low.
I asked her to provide me a copy of the terms and conditions for the earlier ILP Policy and the medical insurance plan. She said she would only provide me the benefits illustration (with terms and conditions) for the medical insurance plan.
Questions:
1) The agent said that the commission she gets from this ILP policy or a term insurance policy is the same (50% in the first year). I did not ask her the percentage for the subsequent years. In the end, she did not introduce any term insurance policy to me (although she said she also sells them) , which I had at least shown some interest in.
Does this mean she is dishonest or does the insurance company earn much more from the ILP policy than the term policy (and she earns the same from both) ?
2) What do you think of this insurance agent ?
3) I had in the past encountered insurance agents from the same company selling this type of ILP policy at least 4-5 times on the street during their roadshows. I understand other companies do sell the same thing too, but they are much less aggressive and seem to organise very few roadshows compared to this particular company.
What is the reason for this ?
This has become very irritating to me, and I would try to avoid this company once I see them from afar.
REPLY
I believe that this agent is dishonest and is not looking after the best interest of the client. Unfortunately, this type of behaviour is typical of most insurance agents from most companies. It is a sad state of affairs.
I hope that clients like you, are willing to write to the MAS and tell them about the real behaviour of insurance agents. If MAS acts against the dishonest agents, it may improve the situation and make the agents more ethical.
Large "effect of deduction" on Living policies
Dear Mr. Tan
I am considering terminating the Living Policy for myself and my husband and buying term insurance instead.
About the effect of deduction, wow, I really didn't know about that until you mentioned it in your blog. And I read again our policies, they really take away such big amount from us! Is this the standard practise? Do other insurance companies do this also?
REPLY
It is true that the Living policy takes away a lot of the premium. But the coverage is wider than a Term policy (unless you buy a Term policy that covers the critical illness as well).
My advice on buying Term insurance applies to a new policy (and not to the termination of an existing policy). Usually, after a policy is taken, I advise people to continue the policy as they have already incurred the high initial expenses. I have two Living policies on my own life as well, which I am continuing.
If you wish to terminate an existing policy, you should look at the yield over the next 5 years. This is explained in this FAQ:
http://www.tankinlian.com/faq/exist.html
The effect of deduction for similar policies sold by other insurance companies is likely to be higher.
I am considering terminating the Living Policy for myself and my husband and buying term insurance instead.
About the effect of deduction, wow, I really didn't know about that until you mentioned it in your blog. And I read again our policies, they really take away such big amount from us! Is this the standard practise? Do other insurance companies do this also?
REPLY
It is true that the Living policy takes away a lot of the premium. But the coverage is wider than a Term policy (unless you buy a Term policy that covers the critical illness as well).
My advice on buying Term insurance applies to a new policy (and not to the termination of an existing policy). Usually, after a policy is taken, I advise people to continue the policy as they have already incurred the high initial expenses. I have two Living policies on my own life as well, which I am continuing.
If you wish to terminate an existing policy, you should look at the yield over the next 5 years. This is explained in this FAQ:
http://www.tankinlian.com/faq/exist.html
The effect of deduction for similar policies sold by other insurance companies is likely to be higher.
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