Avoid being twisted

A reader of my blog asked my advice about terminating his investment-linked policy. His friend advised him that the policy has a "time bomb" and give a poor return. I learned later that the friend was an insurance agent, trying to sell him a whole life policy with premium payable for 25 years.

The conduct of the insurance agent "friend" is considered to be unethical. This practice is called "twisting" and is to the disadvantage of the customer. The distribution cost of the whole life policy is about two years of the premium, amounting to about $3,000. This is an additional cost to be incurred by the customer in switching the policy.

In the USA, this practice is considered to be illegal. In Singapore, there is a warning in the benefit illustration to warn consumers about "twisting" but many consumers are not aware that they are being "twisted".