Saturday, April 5, 2008

Insurance Distribution Channels

Insurance and Investment products are distributed mainly by 3 channels:

1) Tied Agencies - Consultants that solely represent one insurance company. They are managed internally and tied to the company.
2) Bancassurance - It is the sales of Insurance Products via a bank by advisors on a salaried basis. Insurance Companies are able to expand their sales via this channel and banks are able to provide a wider financial services to their clients.
3) Independent Financial Advisers - They are consultants who offer unbiased advice on financial matters to their clients and recommend suitable financial products from the market. They operate their own office and earn their revenue through Advisory Fee or brokerage.

To-date, Tied agencies and Bancassurance are still the major distribution channels with around 85% market share. How different is it between the 3? Let me share...

1) Tied Agencies
* The most traditional way of Insurance distribution
* This Distribution Channel is generally Sales Driven. They will not be paid if nothing is sold.
* They will not be paid to review if their customers are on track to achieving their goals.
* The process becomes "Transactional" and advisors have to close more sales for a Living.

2) Bancassurance or Direct Business model
* Customers come to the branch and they buy insurance as a one-stop service
* The bank consultants get a salary + incentive.
* They are also Sales Oriented because of their monthly quotas and competitive environment.
* The plans they carry are normally limited.
* The turnover of advisers are expected to be high

3) Independent Financial Advisers
* An IFA can select an Insurance or Investment plan from a larger pool
* They can adopt a fee based or a brokerage model
* They are also compensated for ensuring the customer's investment portfolio is doing well through a wrap fee.
* An unethical IFA will select a plan with highest commission and churn investment for customer regularly.
Other Distribution Channels
a) Fee based advisers
* Customers pay an advisory fee and that same fee will be waived by the commission earned by the adviser if customer get any plan.
* This model works best for client interest because the commission is no longer a issue.
* The problem is that the fee structure cannot be easily determined and many are not willing to pay a fee.
b) Internet Distibution
* Customers DIY their own financial portfolio after learning the basic of Financial Planning from the internet
* Theoretically, insurance purchased via this channel should be lower because of the lower expenses involved with no human advice.
* The DIY plan may not be correctly done and may not be properly followed through over long term.

FN: There are good and bad advisers under all distribution channels. Its for you to decide which channel you prefer.


leothu said...

Hi thanks for the information. It seems that IFA model has been popularised over the years. Seriously, we need critical illness cover, we need death and TPD cover, medical coverage, endowment or/and investment for wealth accumulation and the most important is good advise, be it from income, pru, ge etc etc... be it IFA or tied... however i am biased against direct biz and banassurance coz to me they are mostly product seller and not planner. But it's their job anyway so let it be.

Anonymous said...
This comment has been removed by a blog administrator.
leothu said...

well roadshow is a way of doing sales, pru, aia, income etc have it too. usually it is more sales focused, it's good to open sales. If the product knowledge and post sales service is good and provide good advise, I don't see harm. it's up to individual, some ppl simply like to seek advise from stranger.

Anonymous said...

Yesterday, NTUC INCOME was very proud to publish the pictures of the best
malpractitioners in the industry.
Due to unfortunate reason the President of the malpractitioner club had to leave for another club.

Khiat Han Hwee Adrian said...

Just get to know that one of my anonymous commentor who like to bad-mouth NTUC Income is actually from NTUC Income itself.

He knows who is the president and that the person left the company. Disappointed to know this.

Anonymous said...

I was or rather i am, oh no i am confused. You got me on the wrong footing.From the grapevine, it is swirling that a great and top producer from ntuc was forced to join another club for greener pasture. Right or wrong, the market is rife with this news. As the president he represents the likes and the likes are there also as great malpractitioners. Disappointed as you are, the leakage isn't a tiny hole but a huge blown up hole even a an mrt train can pass through.
Adrain , you are smart but sometimes you give away yourself as naive. You have to be street smart.

Anonymous said...

No lah, adrain, i just join back ntuc and i heard of this person who did very well but have to leave becuase of malpractice. I know top prodcuers become president. Since he is the chief malpractitioner and evryone below is also a malpractitioner.I was told he has to leave becuase he cannot tahan anymore. If all those people don't malpractice how do they get to the top. You look at faces and you can see the faces of cruelty and monsters who will not close an eye to committ what they did to poor old folks and ordinary people. Try do that to the rich and i respect them. Adrain, don't tell anyone you know me, ok.

Anonymous said...

I agree that those pictures in the sunday times of ntuc agents are pictures of crooks and malepractising
agents .I dare challenge adrain that all of them are not. i say all of them unethical if not they would not be in the pictures. It is well known , not only in Ntuc, but in other companies too, that those "good" producers are crooks and used unscrupulous methods to con their customers.

Khiat Han Hwee Adrian said...

An adviser achieving MDRT or doing well in the company doesn't mean that this person is unethical or malpractice.

There are many ways a person can conduct his/her insurance sales. They have their strategies and they worked very hard.

It is unfair to group them as conmen.

Anonymous said...

It is true some achieve by helping the clients. but those ntuc agents in the sunday times, i can recognise some them who anyhow do one. they told lies and misrepresent the products. that is one who screw up my relative insurance. i don't believe they are not greedy.They have no conscience towards their own human beings. i hope they will be cutsed.