Poor return on life insurance policies
Wednesday, 20 August 2008, 9:28 am | 794 views
Tan Kin Lian / Columnist
QUOTE
Dear Mr. Tan,
May I ask if the non-guaranteed reversionary bonuses are determined by individual insurance company? Are these bonuses declarations subject to MAS regulatory control or are they depend on the mood of the insurance company?
My wife and I have similar situations with company Y. To our disappointment, the payouts of non guaranteed reversionary bonus for the matured policies are grossly reduced to a mere 0.12% of the sum assured, instead of the 0.45% as per point of sales illustration.
More unbelieving was the fact that the company declared their overall total assets investment return for 2007 was 5.7% p.a. with fixed income return of 4.9% p.a. and a strong equity portfolio investment return of 8.6%.
We feel that we are not given the fair share of the illustrated payouts of the reversionary bonus during last few years, with the strong performance of the economy and the insurance company in particular. Now, we learnt that the illustrated numbers at the point of sales are no more than a set of empty promise numbers.
I see no other alternatives, besides writing to the insurance company for clarification and going to FiDREC to seek redress. Do want to learn from you on how can the interest of the policyholders be protected from the giant insurance company from either misrepresenting or under-declaring their payouts to earn more from us, the commoners.
UNQUOTE
This policyholder is reflecting the views of hundred of thousands of policyholders who saved and waited for 10, 20 or 30 years for their policies to mature, only to see that they receive a low payout compared to what they were promised.
It is true that the investment climate has been volatile and that investment yield has been poor in some years. But they have been good in other years. These policyholders wonder if they have been given a fair deal by the insurance companies that they have trusted over the years.
My frank answer is this: the consumers have been given a poor deal.
The insurance companies are required to invest prudently to meet their long-term liabilities. By doing so, they probably earned a gross yield of 5% to 6% during the past years.
The problem is the high charges that are deducted from the life insurance policy to pay the marketing expenses, administration expenses, mortality charges and profit to shareholders.
These charges are likely to take away 2% to 4% from the yield. This leaves a net yield of 2% to 3%, which is not enough to cover the inflation rate over the years.
At the point of sale, the insurance company probably used a higher projected yield (which is probably justified at that time). Due to the lower yield actually earned, the return has been disappointing.
If the investment yield is reduced, the insurance company can act fairly to reduce its charges to its policyholders, so that the net yield remains at a decent level. This does not appear to be the case. The insurance company continues to operate at high expenses. The policyholders have no choice but to suffer in silence. If they terminate their policies, they will suffer a bigger immediate loss.
To make matters worse, the policyholder wonders if he or she has been given a fair deal, even allowing for the lower investment yield and high charges, and continuing the policy to the maturity date. The nagging question is this: “After paying all these charges, do the bonuses reflect what is fairly due to me?”
In actuarial circles, there is the concept of “asset share”. This is calculated based on the actual premiums paid and investment income earned, less the actual expenses and other charges. The principle of fairness requires that the policyholder should receive his or her “asset share” less a reasonable profit margin to the shareholders.
If the policyholder receives less than the asset share under a participating policy (i.e. a policy with reversionary bonus), it is clearly unfair.
How do the consumers know if they are getting a fair deal?
This is the responsibility of the regulator, which is the Monetary Authority of Singapore, or MAS. The regulator is required to ensure that the life insurance companies treat their policyholders fairly in respect of the bonuses distributed to them from the participating policies.
The regulator now requires the bonus distribution to be decided by the board of directors, on the recommendation of the appointed actuary, and that the process be governed by an internal governance policy, as set out in MAS notice 320.
In my view, this does not provide sufficient protection to consumers. There is a conflict of interest within the board, which represents the interest of the shareholders.
I hope that the regulator will change the approach. It is better to have an independent actuary appointed by the regulator to look at the bonus distribution and make sure that it has been declared fairly to the policyholders.
If you look at the annual report of your life insurance company, you will see the scales of bonuses declared on various series and types of policies. You will probably see many complicated scales of bonuses for different series and types of policies. You may wonder why there are so many scales and if different policies are being treated fairly in respect of the bonuses distributed to them.
Some companies may appear to be distributing more bonuses to their newer series of policies, as it helps in their volume of new sales. One wonders if this is being done at the expense of the older policies.
These thorny issues remain unresolved.
In the absence of adequate safeguards, it is better for consumers to avoid investing in life insurance policies, where the distribution of bonus is not transparent and may appear to them to be unfair. It is better for consumers to invest in a low-cost investment fund, which is more transparent. The consumer will be able to check yearly that he or she has received the actual investment gain, less the agreed charges.
———-
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Wow: tough talking Mr Tan.
Seriously, I think I once read on yr blog that you recommended term insurance and using the savings vis-a-vis life policy to buy unit trusts.
If I am correct, you may wish to link that piece to this article.
Keep up the gd fight.
Whole life and endowment products are scam. Despite so much grouses nothing is done. The insurance agents have a field day conning more people at roadshows. The bank RMs kick the old and frail customers in the side with very hard to understand products. Guaranteed products which guarantee proceeds to the beneficiaries; when it matures with refund of original capital the owner is already dead..This is the way the banks get cheap source of money.
.We hear of these malpractices every day and nobody is coming to the help of these people. The regulators are sleeping. They collude with the sellers to make Singapore look like a vibrant financial hub. Only look like> The truth is, it is more a huge casino with game products ranging from life insurance scam to never see daylight structured investment with restructured bonus which gives the insurer a blank cheque to do whatever they like…
MAS, where are you? Don’t give guidelines and notices to the insurers.No one is following . Surely you know by now that the insurance companies don’t follow and implement it…..For show only? If not why there are so many useless products like the cash back, refund anticipated endowment, structure products flooding the the market…MAS, go directly and get them before more people’s retirement goes up in flame in the hand of the insurance salesmen
Parito 80/20 principle is a rule of least effort. Robert Kiyosaki 90/10 is a money rule which states that 10% of the people earn 90% of the money.
My 95/5 rule differs from the rest. It states that 5% of the insurance professionals are qualified, honest and competent and 95% are insurance salesmen and they are not qualified, dishonest and incompetent. The 95% insurance salesmen screw up the life of 95% of the consumers. The 5% of the consumers are smart enough to see through the unethicalness and unscruples of these salesmen and avoid them with a 20 foot pole and have a doberman to protect them against these salesmen and women and without the help of MAS.
“Recently, viatical settlements have thrown the life insurance industry into turmoil. A viatical settlement involves the purchase of a life insurance policy from an elderly or terminally ill policy holder. The policy holder sells the policy (including the right to name the beneficiary) to a purchaser for a price discounted from the policy value. The seller has cash in hand, and the purchaser will realize a profit when the seller dies and the proceeds are delivered to the purchaser. In the meantime, the purchaser continues to pay the premiums. ”
“Although both parties have reached an agreeable settlement, insurers are troubled by this trend. Insurers calculate their rates with the assumption that a certain portion of policy holders will seek to redeem the cash value of their insurance policies before death. They also expect that a certain portion will stop paying premiums and forfeit their policies. However, viatical settlements ensure that such policies will with absolute certainty be paid out. ”
When selling you a whole life product insurers are actually taking a gamble with you that you will NOT hold it till death claim They will profit more based on the premise that very few people hold their policies for whole life or till they die. It will be a big loss to the insurers if every policyholder holds till they die ……..
The truth is whole life plan is a scam. The insurers promote through their greedy agents that you need an insurance for wholelife to take care of the unexpected in old age. But in their heart they hope you would not. Some companies offer a way out after making enough money from you, an extra option like annuity at age 60 .You think they think of your retirement. So good of them, eh?.The truth is they are trying to avoid a financial catastrophe for themselves in case you die..
Anyway, MAS statistics corroborates this truth about whole life never being held for whole life. Before the half way mark more than 50% of whole life policies already drop out.This is exactly what the insurance companies want and expect actuarially..Did you hear them telling you? Why do the insurance agents keep selling the wholelife need and deceive consumers when they know it is almost one to hundred that wholelife be kept till old age even, let alone death claim?It is the big money for both company and the agents.It is very profitable to sell whole life products
It will be good and fun to see if all the local insurers’ whole life and critical illness products will be used as viatical settlements. I hope some enterprising brokers will think of this and use local wholelife plans for viatical settlements.
Will the insurance companies cry foul or fowl?
I have written many articles and FAQs (Frequently Asked Questions) in my website and blog:
http://www.tankinlian.com
http://www.tankinlian.blogspot.com
A list of FAQs are contained in this webpage:
http://www.tankinlian.com/faq/
You will be able to find a FAQ that is relevant to you. Some of the more popular ones are:
Financial Planning for the Young
Investing your savings
Financial Planning for Seniors
Saving for your Child’s Education
There are also tips on investments in the FAQs.
It will require you to spend many hours of reading, but this is time that is usefully spent. By educating yourself on the fundamentals of investment and insurance, you can avoid being taken for a ride by a financial adviser or insurance agent who wants to sell you a product that can pay them a high commission (at your expense).
Many of them cannot be trusted, due to the conflict of interest.
Hi
Watch this video on Youtube. It explains why insurance agents are recommending products that are bad for customers and good for agents:
Susie Orman – Life Insurance
http://www.youtube.com/watch?v=sGDgYLCpnDo&feature=related
I agee with the points raised by Susie Orman. They are correct and put across convincingly.
Hi
I like to invite the public to share your personal experience on insurance and financial products that “rip off” the public. These are products that offer a poor yield and take away a large part of the investment gain.
Many people were duped into buying products from insurance agents that they trusted. The agent did not tell them the key facts, that a large part of the premiums for the first two years, is used to pay the commission to the agent and their managers. They are taken away (i.e. confiscated) from the customer. When the customer found this out, they felt helpless.
Actually, the customer could make a complaint to the Monetary Authority of Singapore, about the unethical conduct of the agent. I consider that this amounts to cheating. If a few customer makes this complaint, MAS will realise the seriousness of the problem, and will take stronger action to raise the ethical standards.
In other countries, the authorities decided that they cannot leave this matter to the insurance industry to sort out. They imposed limits on the amount of commission that can be paid to the agents. These limits are lower than the commission rates that are paid to insurance agents in Singapore.
Re Post 7 — sharing yr experiences with Mr Tan.
I have come across the practice of agents just showing the insurance co’s material on projected returns; and not saying anything or very little when they are asked abt returns.
If you have had this done to you, I suggest you tell Mr Tan because this is an abuse that should be curbed. They are not lying but the agents who do this are “economical with the truth”.
I have been con into buying insurance and unit trust by AIA agent, and POSB using OA and SA of my CPF acc. since 1997 , I lost quite a lot of sum. These agents sweet talk me, some are relative. They promise me return, in the end, I have to return all my saving to them. Idiot agt.
Hi Tew NS,
in my 3rd posting i mentioned the 95/5% rule that applies to insurance agents. You were unfortunately like many others who kenna conned by the ever ubiquitous greedy insurance salesmen and women who know nothing about anything but selling you something that pays them high commission.
What do they know about investment? The CPF record is stink with your losses caused by these salesmen who masquerade as consultants, planners, senior consultants and wealth managers……
I know your problem. It is not easy to locate the 5% honest, competent and qualified advisers.
Too bad for you. The only risk management measure you can take is to stay away from all investments, whatever kind from whole life , endowment insurance products to ILPs , UTs and other rip off products.
The agents are not idiots. The consumers are.
I prefer to buy term insurance and invest in unit trusts. Terms insurance are much cheaper than whole-life and endowment plans. With the savings, I would invest them into bonds, stocks and unit trusts. In this way, I have much better control in the way my monies are invested. I am also realistic that the prices of investments like stocks and unit trusts can be quite volatile and times like now, prices will dip and as such the value of my portfolio can go into the red. But I’m not worried because eventually the markets will recover. I also take a 5-10 years time horizon. I always hear complaints from people when they make losses but usually they keep silent when they are making monies. That is human nature. Majority of investors do not make monies or not enough of it on their investments because they succumbed to their emotions of greed and fear. So don’t always blame the advisers for your loss. In all industries and sectors, there will always be a few “black sheeps”. The majority are decent professionals doing an honest job and putting food on the table. The investors on their part should equip themselves with sufficient knowledge and ask as many questions until they are satisfied. Consumers can also seek more information from MoneySense, a service provided by the Singapore Government.
Mr xtrakm,
there are not just few black sheep. Black sheep are insurance agents who are dishonest and unethical but there are a lot more incompetent ones who cause MORE harm than the black sheep.Together they make up 95%.
If investors must equip themselves with knowledge ,why pay the agents for nothing, for filling up forms? The adviser is to advise but we are getting a lot of salesmen who sell you products that are good for them and not for you. This is dishonesty.Are you supposed to be discerning? to be better than the advisers?Asking the right questions is not simple as you think. You may but many consumers don’t know. These people become victims, manipulated without even they knowing it.
There must be some kind of mechanism to control , to check and to comply, failing which the insurance agents must be punished.
If they think selling term insurance which is right for the consumers but not for them then they have come to the wrong business. They should leave and go to where they can make a lot of money without having to resort to malpractices. But leave the innocent, naive especially the poor consumers alone. Go rob the rich, if they can.
Let me make a statement. 95% of consumers can NEVER make independent decision without the help of an ADVISER. The outcome of the decision depends on the HONESTY and the COMPETENCE of the adviser
In today’s ST report a woman is suing her ex lawyer for misleading advice which led her to be jailed for 10 months. The case has been escalated to the Law Society for further investigation.
Now what about insurance agents? What if insurance agents mislead, misrepresent to their clients about financial products that are not appropriate, short change their clients’ needs resulting in under insurance, losses and excessive risk?
Unfortunately, for financial products the outcome cannot be known immediately unlike the above mentioned case which landed the accused in jail.
Why? Simply, because almost all consumers have no idea about what they bought and are not willing to consult an expert third party for check and review and the supposed belief that efficacy of the financial products will be known after a lapse of time.
Unfortunately, also the relevant authorities are not concerned until a case of malpractice is reported.
How to detect a malpractice if the consumers are clueless and trusting and left to their sincere and caring agents to do what they like.
Have you any idea how many cases of malpractices or inappropriate recommendations can be found if they are reviewed?
This is the feed back from some of my friends (qualified financial planners); almost all cases under their review have evidence of inappropriate recommendations and malpractices or cheating. These cases were not brought to light because the aggrieved policyholders didn’t want or to embarrass their friends , relatives or didn’t want to get into the hassle of legal tussle.
Consumers are to be blamed and in fact unwittingly abetting in the proliferation of these malpractices,. Unless, consumers are forthcoming and ‘bold’ to bring the rogue and errant insurance agents to court, the industry will always be plagued .This will send the wrong signal to wannabes who think there is a lot of money to be made or had in the industry. It is jackpot industry where any tom dick or mary or jane can have a freewheeling right to make big money. The licensing mill helps in making it easier for them with a farcical multiple choice exam to feed the industry need in shortest time. This is real mockery that a financial’ expert’ can be groomed that way in a couple of months and be put in the market to dispense financial advice. No wonder so many casualties every year.CPF members’ money
is smouldering in smoke, in losses and nothing is done about it.
There is an urgent need to have a review body to help the policyholders to check what they have bought, to educate them, to be wary of signs of malpractices and most importantly their rights as consumers..
I hope this reminder will provoke an awareness of what is going in the industry and hope the consumers will treat every insurance agent a ’suspect’ and to put him or her under intense interrogation .
Hi zhummmeng (#13)
It is easy for a customer to lodge a complaint against an unethical insurance agent. This is how it can be done:
> The agent is required to submit a Benefit Illustration
> The agent is required to explain the key features of the Benefit Illustration
> The customer can lodge a complain that some of the key features where not explained properly. (This practice is so rampant, that it becomes a joke).
> The complaint should be lodged with the Monetary Authority of Singapore.
Many of the life insurance products have charges that someone describe as “daylight robbery”. They take away two years of your savings. If you save $300 a month, the two years of savings is $7,200 taken away from your savings to pay the insurance agent and the manager.
What is the benefit that you get by spending $7,200 of your hard earned money? None. The agent is not even able to give you advice on the proper financial products that can give you a good yield for the future, or to save on income tax or estate duty (as there are virtually no such saving in Singapore). The customer is paying a lot of money for virtually nothing.
These charges are mentioned in the Benefit Illustration, but are not explained to the customer. If they are explained, the customer will not be willing to buy the product. So, the agent are being trained how to divert the customer’s attention away from these figures by giving some fuzzy explanation.
If sufficient people make a complaint to MAS, then MAS will do something about it. Meanwhile, more and more people will continue to be fleeced.
Despite being a FAA requirement to disclose every thing, good and bad, insurance agents have ways to go around it and with the help of the company the agents can cover up their footprints.The problem with consumers is that not many are willing to lodge a complaint because their insurance agents are usually their relatives, friends or siblings.Imagine being screwed up by own people and institute legal actions against them? Unlikely. Best settle “out of court” .
Mr. Tan , during your time, all ntuc quotations carried a yield page that at a look the customers could see the returns of the policy at various period. Now this feature is lost or deliberately omitted.I wonder, is it to hide the dismal and obscene returns of the new products on purpose?
Where is the transparency? This is concealment. Don’t beleive? ask for a quote on revosave or vivolife.
Ask a so called ‘consultant’ with a prefix ’senior’ for the return she ‘kallang kabuk’ with the financial calculator. With trembling hands she tried but failed and had to admit her inadequacy and incompetence…..How to advise clients when ‘consultants’ don’t know how to use financial calculator to crunch figures which are very important to the customers??
This agent looked kind of the typical smart and yet incompetent but sweet with words and bullshits agents. She wasn’t the only one. There are many like her. Their looks belie their lack of financial skills.Unwary customers are sure to be bowed over. Today there are many of this kind of insurance agents masquerading as consultants prowling the street seeking victims to suck their blood.
The public must be wary and must not fall for the traps. It is a mine field out there. Be careful
“If the policyholder receives less than the asset share under a participating policy (i.e. a policy with reversionary bonus), it is clearly unfair.” absolutely! that’s understandable.
This article is partly taken from Mr. Tan Kin Lian’s blog
Understanding Twisting and Churning
There are two types of life insurance fraud carried out by unscrupulous agents you should be aware of. The two closely related types of insurance scams are known as churning and twisting.
How do those agents carry them out and what do you do if you’re a victim? Make sure you know these before you get scammed!
The fraudulent practice of making an insured drain one life insurance policy in other to fund another new policy is called churning. Important information about the full consequence of their action is dishonestly withheld by the agent involved.
Closely related to this is twisting. In twisting the policy holder is tricked to drain funds to buy another policy from another life insurance carrier. Run; don’t walk if an agent promises you a new policy that will give you more coverage without increasing your premium. It’s a scam so beware!” Unquote!!
In Singapore churning and twisting are rampant among insurance agents from reputable companies.
Examples are the scams that come in the form of “buy one get one free”.It can be an anticipated endowment cashback product to fund a limited payment whole life, ie. using the cashbacks of the endowment to pay for the premium of the WL product.. The insurance agents get 2 commissions. Do the customers know? Are the customers better off?
Another scam is drawing down a specific sum from a single premium ILP every year to fund a limited payment whole life. It is assumed that the single premium ILP investment makes enough money to pay for the premium of the limited WL.
Similar to above , another scam is this time the draw down goes to pay the premium of a regular ILP.
What is the underlying of these scams?
They are to generate more commissions for the insurance agents but not more benefits for the customers.The products involved are usually high commission products. If there are any increase in benefits they are marginal
and not justifiable as the benefits would have been much better if they have been taken up as a single plan, lower cost and more benefits. There is more “bundling”. Now the already bundled product is further bundled with another and this makes it even more dangerous for the customers in the event of a financial difficulties, both plans are affected. The parasite plan(WL)is depending on the mother source for funding which must not go wrong.
Today, the greedy , unscrupulous and “creative” agents are resorting to this scam to earn a living at the expense of the consumers. If it is not stopped more consumers will become victims. The authority must investigate if it is serious
about cleaning up the industry.
TOC, what happened to my post?
Hi Mr. Tan,
Thank you for doing what you are doing, but I feel a person of your calibre and training, you should take a leadership role in highlighting the weaknesses and flaws of the current insurance situation to the authorities. As you said, it is heart wrenching to know that after 20 yrs of saving in ‘good faith’ through insurance policies, we get miserable and pathetic returns, if any at all.
I certainly hope you will take a more proactive role then mere blogging. If you push hard enough, I believe it will cause the correct agency to look and rectify the situation, hence helping many unsuspecting people from being ‘devoured’ by the insurance giants.
Please, Mr. Tan.
Thanks again.
Hi Just Concern (#19)
I suggest that each policyholder, who feels that the insurance company has been unfair in the cash or maturity value, should write to the MAS. If there are sufficient complaints, then MAS will act.
I have written to MAS on my insurance policies and my wife’s policy, but they are not willing to act at this time. We need more people to write in, so that MAS will be aware of their duty.
I find that the life insurance policyholder in Singapore are quite badly treated, due to the weak regulation by MAS.
Come on, MAS, surely by now you have seen and heard about the malpractices, the unscruples, the dishonesty and incompetence of the insurance agents. Many innocent, gullible and clueless consumers have fallen victims to these conscienceless agents.
Since the introduction of the Cedli recommendations how much changes have you seen taken place…. Nothing, and as far as the agents are concerned the only change is they having more papers to read and carry and more classes to attend..
Have they become more professional, more ethical, customers centric, financially more skilfull and competent ?. No, they are more skillful in scheming and manipulating to cheat customers, to bullshit customers , to mislead customers, to misrepresent and getting more glib tongued, both men and women.They are intensively trained to cross sell, up sell down sell and to confuse the customers.
With the help of technology they further confuse by committing non disclosure and twist and hide truths from customers to short change them.
As you know the consumers today are no better off than 20 years ago. They are still under insured. They are still struggling to “save’ for retirement, many still cannot retire.. Why? if the insurance agents had done a good job this would not have happened. Their CPF balances would have been healthier . Instead, you know many CPF members’ are still reeling from losses caused by incompetent advice from insurance agents and churning and twisting by insurance agents.
We are in the first world but many consumers are still in the third world, poor, stuck in the poverty groove, grossly under insured because of third world practices of insurance agents..
Something must be done. The current agents are either dishonest or incompetent. Both are as bad . If this situation is not addressed more lives will suffer in the future without their knowing it.
Today the financial products are very bad too and the manufacturers are getting bolder, rolling out expensive products with poor benefits and hidden in thick layers of rubbish of so called supplementary benefits and useless frills. They are deliberately designed to be complicated to confuse and hoodwink the consumers with the help of greedy salesmen and women.
MAS must control the manufacturers, the insurance agents and provide a more conducive environment where consumers feel confident and safe. Today , no matter which direction you turn you bound to meet an unethical insurance agent peddling a rip off and lousy product . It is scary .And the industry is attracting more young people at the expense of the other industries.They have been impressed and misled that there is lot of easy money to be made. And the licensing mill is churning out as many and as fast to feed the insurance companies’ need and who are competing for market share. As a result all ethics, competence, integrity and the nobility are thrown to the wind because they stifle and hinder the ambition and greed of the companies and the greedy agents.
Intervene before it becomes a big casino for the insurers and their accomplice.
Hi zhummmeng (#21)
I hope that the Monetary Authority of Singapore will engage someone to carry out “mystery shopping” and submit an independent report on the practices of the insurance agents.
Another way is to ask a few customers, who bought their life insurance policies recently, if they are aware about the key terms of the contract - i.e. the high charges, the low cash values, the uncertainty of the return, etc.
They will probably find many shocked customers who were “taken for a ride”.
Perhaps, these customers should write and complain to the MAS about their bad experience.
I search the MAS website for the e-mail address or postal address for people to lodge the complaints. I was not able to find it on a few occasions. It seems that MAS does not want to make it easy for the public to lodge these complains. (If I have so much trouble, can you imagine the bigger problem faced by the public?)
I don’t think MAS is interested to protect the interest of the consumers..You can see whatever notices, directives or guidelines issued all this time were supposedly to protect consumers and to ensure compliance by sellers and manufacturers to bring about a fair dealing but they are dead letters issued for show , for the sake of cosmetic makeover to make FAA look more ‘garang’ and bulky . Where is the enforcement? The truth is they are protecting the financial institutions to fleece the poor and elderly public every day..
Never before that you see so many funny funny products, exotic products once used to be esoteric products for the well heeled now for the blur blur man in the street. Never before that the insurance companies issue “hybrid” cash back refund , sunny or rainy day complex products which the public hardly understand. How on earth these products passed through the so called stringent control and evaluation of MAS?
To date how many rogue financial advisers and insurance agents have been dealt with? “Ten fingers count cannot finish” and yet when you throw a stone you are bound to hit one rogue insurance agent. This is how rampant malpractices are and yet in MAS website only a few were brought to task and prosecuted.
What is the point of mystery shopping? Is it an exercise to tickle the insurance salesmen or some kind of sexual amusement for MAS stafft. Where is the complaint mechanism for the public? Where are the eyes and ears for feedback from the ground? You only get feed backs from the manufacturers, the financial institutions on how to fleece more consumers to make them fatter.The dialogue is with the sellers .What about the buyers? You think’ money sense’ is enough to educate the consumers? After the ‘money sense’ you leave the consumers to the wolves and tell them it is “Caveat Emptor”…The old lady or the poor man know nothing about Caveat Emptor. They know they need to pass their retirement years and for them money is always no enough and yet they are thrown into the Caveat Emptor arena to be devoured by the predator insurance agents and the bank consultants. What protection do they get from MAS? Any insurance like bank deposit?
ON whose side is MAS? If it is for the sellers then we need one for the buyers.
The current CASE is also toothless , not much bite it can give. The Consumer protection Act has limits and it is blaming the tribunal for it.
Consumers, the odds are stacked high against you. You need other means to strike back for your rights.
AIA one of the agent sell insurance to her own brother, she put her own name in the nominaton forms instead, her brother did request to nominate his father’s name.
This woman surname is Tan.
What about converting policies to paid up policies so as to continue receiving some coverage while avoid to continue paying into such policies? Say for policies that have been kept for 10 years?
Mr. Tai, that is good idea and better alternative to buying a limited payment WL although I don’t like both.
Yes you are still covered but on reduced sum assured. I think it is ok if you are already 60 years old and don’t need so much coverage.
However, it is never made known to WL policyholders by insurance agents and the company that you don’t actually stop paying. You are paying but not directly by you.
Your cash value is paying for the the insurance cost or mortality charge which gets bigger and bigger as you age. It may come to a time when the cash value is showing negative growth. It may be wise to cash it out to fund your retirement and not those insurance agents who bullshitted you to keep it until claim or something happens.If you have an H&S this will suffice.
If your goal is to pass it to your next generation and you don’t need money for retirement it is a good idea as a legacy. Alternatively, sell it to your children and let them pay the premium until you die. It may be a good investemnt for them.
Unfortunately many many people need money for retirement and the company is so HAPPY that you cash it out and some companies even pay you extra 5% to cash it out for an annuity . Why? I f every policyholder keeps until claim the company will be bankrupt. That is also why insurance companies are AFRAID of life settlement trading or second hand life insurance trade.
Hope that life settlement business will pick up in Singapore using local insurance companies’ WL products as investment. I wonder the insurance companies and their agents will change the tune if it really happens
“Your cash value is paying for the the insurance cost or mortality charge which gets bigger and bigger as you age. It may come to a time when the cash value is showing negative growth. It may be wise to cash it out to fund your retirement and not those insurance agents who bullshitted you to keep it until claim or something happens.If you have an H&S this will suffice.”
Could you clarify if the statement is true. As you know that the mortality charges increases with age is for ILP but not for WL. WL charges a fix rate across. The cash value should increase with age.
I have many times said that there is a bomb in WL too. The mortality charge is charged on yearly basis , or YRT like the ILPs
BTW, regular ILPS is also known as variable whole life . It works exactly like whole life except that the investment component is in ILPs of your choice and traditional WL is lumped together or pooled with the rest of the policyholders without regards of the individual policyholder’s risk tolerance, time horizon and goal. Traditional WL is disadvantageous becuase of this. You don’t have control.
The mortality charge increases with age for both traditional and regular ILPs.
If you have a traditional WL, you can observe the rate of increase of the absolute cash value slows down after 65 years old, ie. it means the rate of return is decreasing . Better still if you know how to calculate just check the rate of return after 65.
There are many things your agent never disclosed to you.It was never his or her interest to disclose the pros and cons.He or she disclosed what you liked to hear
ONLY, perhaps not just pros but lies too.This is selling and selling depends a lot on lies.
My agent told me that he is not able to churn the policy illustations after the age 65 because the system doesnt allow him to do so. As such I could not verify. But he added that the mortality charge for WL is constant but significantly higher compared to ILP (at the beginning). ILP mortalilty charges increases with age
Your agent is either lying or he doesn’t know.
All companies can. Which is your insurance company? You can get the company to give illustration beyond 65..
let me explain once again. Your premium remains constant through out but not the mortality charge. When the mortality charge exceeds the premium after 65 the difference comes from your cash value and over time when mortality charge increases faster than the cash value accumulation the rate of growth slows down and when overtaken by mortality charge it becomes negative. The mortality charge is not fixed and it is the same for anyone of the same age regardless of when you take up the plan. The premium is made of 2 components , the mortality and the investment or saving.
If your agent insists that mortality charge doesn’t increase for WL it is time you consider changing your agent, taking the advice of Suze Orman.
Mr. Concern, watch this video by Suze Orman. about mortality charge
http://www.youtube.com/watch?v=nfI6-KrBE7E&feature=related
“When the mortality charge exceeds the premium after 65 the difference comes from your cash value and over time when mortality charge increases faster than the cash value accumulation the rate of growth (ROG) slows down and when overtaken by mortality charge it becomes negative.”
Hi I think this statement is grossly incorrect for a WL plan. The ROG of cash value accumulation can never be negative. You might wish to seek an opinon from a qualified actuarist You statement is true for an ILP.
There are many comparisons between ILP, WL and BITR. However, the comparisons are difficult as each plan risk is different. BITR looks better but it goes as far as it looks on paper. Why the comparison is flawed?
1) The insurance term coverage is different for BITR(30 years or capped to certain number of years) with ILP and WL (Whole Life).
As such, the cost of insurance is different significantly. It makes comparison difficult unless the term insurance is similar to a whole life.
2) BITR may sound better, however if an individual does not invest or invest correctly to a “correct” fund, he might ends up badly or worse off.
3) Remember, you can blame the agent if your ILP investment isnt going as well, but BITR you cannot blame anyone but yourself. People with no financial background should seek help. An analogy: Its like climbing a mountain. You know as long as you climb up you probably will reach the top, but if you do it on your own, do you know the dangers of each mountain. Without a qualified guide or experience, it could be very dangerous to be use just internet videos, internet comments or other sources to climb the mountain. Are they reliable?
BITR and WL, ILP cater to different needs and one should understand the risks for each strategy.
Remember, insurance was a very good form of savings in the 90s but not in 00s, what will happen next in the future is anyone guess?
Should one use soley a BITR strategy? You will probably end up in a frying pan if
your execution of this strategy is not right/incomplete.
Hi Concern (#32)
Life insurance products, including whole life and investment-linked products, can be designed to be good for consumers.
The problem is that these products are designed to pay high commission to the agent and give poor value to consumers. This high cost is not disclosed to the consumer.
Up to two years of the premium are taken away to pay the commission and marketing expenses. If the monthly premium is $300, the charges can be as much as $7,200.
This is a lot of money to be taken away from the unsuspecting policyholder, and is not told to the policyholder at the point of sale. This fact is hidden in the Benefit Illustration among 20 pages of confusing information.
If the charges are kept at a reasonable level, say a maximum of half year’s premium (which is still a lot of money) and this is clearly disclosed to the policyholder, then a whole life ,endowment or investment linked policy can be considered to be suitable.
Mr. Concern,
it is no point arguing till the cow comes home if you rely on your incompetent insurance agent for ‘untruths’ Get your insurance actuary to give you the projection till you are 80 and you can see how your cash value decreases..
Have you watched and listened to the video clip by Suze Orman?
Let me say it once more.
Regular ILPs are known as variable whole life. They are designed to mimic
traditional whole life except that the investment component you have a say. For traditional WL you have no say. Your investment is thrown into the ‘pot’ of portfolio with the rest of other policyholders, fixed for everyone. Only one size and it is such to fit everyone’s goal, risk and time horizon.Is it a good idea? As you say everybody got different needs, right? But yours is lumped with the others who may have different needs from yours, right?
Mr. Concern, if all those information came from your agent, I am afraid you need to consider changing your agent because he or she is dishonest or incompetent.
Check my facts out with a trusted actuary too.
As a Toronto life insurance broker I openly admit - life insurance is definitely not very powerful investment tool. Clients have to understand, the main purpose of insurance is to be INSURED - to get some money after death/accident. The saving part of policies is just a side product. Some people just don’t have mood/skill/guts to enter stock markets, to buy bonds or whatever to save money. For this situations, life insurance provides satisfactory performance (especially when we count tax reductions too). But as you said, there are many expenses for insurance companies which are after all reflected by lower dividends…
Regards,
Lorne
Hi Life insurance Canada (#35)
There are virtually no tax deduction for life insurnace in Singapoer. It does not make sense for consumers to buy life insurance for savings, especially as up to two years of premium is taken away for marketing expenses. In other countries, there is tax reduction to offset this upfront cost. But not in Singapore.
An honest insurance agent, acting in the best interest of the client, will recommend a low cost term insurance plan. But this does not give much commission to the agent. So, the agent (in order to surviev and prosper) has to sell high cost products and hide the poor value from the customer. It is a win-lose-lose situation (win for the dishonest agent, lose for the honest agent, lose for the customer)..
Extracted from: http://www.tankinlian.blogspot.com
Several AIA policyholders have asked my advice. They are worried that AIA may be affected by the collapse of AIG. They asked if they should surrender their AIA policy now and receive the surrender value now.
My advice is:
> AIA has a separate policyholder’s fund covering its liability to its policyholders in Singapore.
> To my knowledge, this fund is solvent and is not affected by the problem faced by AIG
> There is no need to panic and surrender the AIA policies at this time
> Even if this fund is in trouble, there is a Policyholder’s Guarantee Fund managed by MAS that can take care of most of the liability (maybe 90% or more).
> It is better to wait for any official announcement from MAS
I hope that my comments are correct and can help to allay the fears of AIA policyholders
Dear Mr. Tan,
i was shock when i return from overseas that all my insurance plans with aia are in hot oil!!! i would appreciate your advice how could i minimize my loss. i have 1 life plan, 3 20+ years endowment plans and 3 single premium plans. If AIG goes blast, what can i expect from these plans.
What if i want to buy from other insurance co?
Hi 2shock (#38)
Do not surrender your policies. AIA is okay. They have a separate fund and does not depend on AIG. If AIG gets into trouble, they will sell AIA to another strong financial institution. All the best.