Gideon Lee: Buyers, not agents, decide the products they want...

Published in Straits Times

 

I AM curious about Mr Tan Kin Lian's ardent advocacy of term insurance
over whole-life and investment-linked plans
('Two key factors insurance buyers don't know'; Wednesday) in his reply
to Insurance and Financial Practitioners Association of Singapore president
Jeffrey Tan's letter
('Choice of insurance plan hinges on affordability, buyer's needs'; last Friday).

When Mr Tan Kin Lian was the chief executive officer of NTUC Income for 20 years,
he endorsed the sale of thousands of whole-life and endowment policies
and investment-linked plans (ILP).

He isn't quite right when he states that agents prefer selling whole-life plans
instead of term insurance because they can earn significantly more commission.
Policies are usually sold and bought based on a client's budget limit
rather than the sum assured.
An agent earns the same commission for a term plan
that charges a monthly premium of $200 a month
as he does for a whole-life policy or ILP with the same premium.
Most buyers also prefer whole-life and ILP over term insurance
because they do not believe they will ever need to claim on their policy,
especially for critical illnesses, and want to get their premiums back.
Almost every client of mine asks me how he can retrieve his premiums
if nothing happens to him.

Mr Tan Kin Lian inflates the commission an agent earns.
If agents earn as much as he thinks,
recruitment shouldn't be an insurance manager's biggest headache as it is now.

Mr Tan is also wrong
when he states that distribution costs are paid to agents for the advice they give.
Distribution cost, as the name suggests, is commission paid for selling the product
and is not an advisory fee.
An agent is paid according to the amount of money he brings in.
To offer an analogy, a doctor's charge for consultation
is separate from the income he earns through selling medicine in his clinic.
In the agent's case, the consultation is free.

It is not the agent's fault if a customer needs more cover.
Mr Tan Kin Lian's one-policy-fits-all-needs solution
does not help clarify the different insurance requirements of buyers.

Gideon Lee


My comments
I hope that some consumers will write to the Straits Times to show how they have been misled by insurance agents into buying the bad financial product. 
I will be writing a reply to the points raised by Gideon Lee.