High distribution cost

COMMENT POSTED IN MY BLOG

Wonder if all insurance company sell low cost, will the insurance company survive the business environment?

Is the distribution cost paying the agent commision only? What about the CEO's pay where does it come from?

So it is not fair to always lament on the commission earn by agents. What the agent earns is only part of it, distribution cost goes to pay more than agent commission.

I wonder if Mr Tan will comment on this or allow this to be posted.

REPLY:

Products that are simple and meet the real needs of the consumers can be sold with a low distribution cost. It can have a reasonable margin for all parties to earn a reasonable income.

Unfortunately, many products are designed to be complicated, costly to administer, costly to market, and give poor value to customers.

The insurance agent can easily sell these high cost products to naive customers, and earn a high commission from the sales. The managers and CEO can also earn high salaries from the high profit margin.

After the product is sold, the customer is locked in for 20 to 30 years, and can only terminate the contract at a great loss. If they keep the contract, they get a poor return from their years of savings.

I hope that businesses will be ethical and will market products that are fair and give good value to customers.