Twisting is bad for the customer

Insurance agents are provided with a range of complex products, such as whole life, endowment and investment-linked plans. There are many variations of these products, including the cash back features. Some have guaranteed returns, some have bonuses, and some products have values that are linked to a fund.

It is easy for an agent to confuse a customer to stop an existing insurance policy to buy a new policy. The agent can easily point out a different feature and explain why it is good for the customer. This is not true, but the agent is trained on how to make the customer believe in the statement.

The agent can earn a high commision on the new policy. This commission can take away newly two years of the premium. If the premium is $300 a month, the customer can lose up to $7,200 of premium as charges taken away from the new policy, mainly to pay commission to the agent.

This practice is called "twisting" and is illegal in many countries. It is quite rampant in Singapore. Many consumers are taken for a ride. If you find that an agent has "twisted" your policy, you should lodge a complaint with the insurance company or with the Monetary Authority of Singapore.

The insurance companies should also be blamed for this bad practice. They introduce new products, which gives the opportunity for the agent to twist the policy of other agents, from the same company or a new company.

How is the customer twisted?

1. If you have a whole life or endowment policy, the agent will tell you that it is better to buy an investment-linked policy by showing the projected returns assuming a high yield

2. If you have an investment-linked policy, the agent will tell you that it has lost money (which it has in the recent market down-turn) and move you back to a whole life or endowment or cash back policy.

Remember: the agent always gains from the high commission when you stop a policy and buy a new policy. This is always done at the expense of the customer.