Endowment and whole life products

Endowment and whole life policies are useful financial products. They encourage people to save for the long term in a large, well diversified fund, called the life fund. They provide risk pooling by paying a large benefit on premature death.

The drawback of these products are:

a) The high charges (used to pay commission to the agent)
b) The high penalty on early termination of the policy

When I was chief exective of NTUC Income, I addressed the drawbacks in the following ways:

a) Reduce the commission and other distribution cost, compared to the market
b) Provide higher cash value and shorter breakeven period

I was able to benefit a million policyholders by giving them a higher return, compared to similar products offered in the market.

In recent years, there is a better choice for the consumers - buy Term and invest the difference. Many people are taking this approach by buying Unit Trusts. Many insurance agents have converted to financial advisers to tap this more competitive product.

It is possible for endowment and whole life policies to be made competitive again - to compete with Unit Trusts. The distribution cost has to be reduced. Many people will be attracted to low cost endowment or whole life. Sales productivity can be increased significantly.