Tuesday, June 17, 2008

Same apple that cost so different

When I was a tied agent, I often thought that premium of similar coverage from different insurance companies should be somehow similar. Pricing difference are expected but shouldn't be too far apart. I thought that the market is efficient enough to identify rapidly if a plan is over or underpriced. I thought the market is somehow competitive and Insurance companies should be pricing their plans approximately the same. But I was dead wrong...

I had a busy weekend making plans comparison from different insurance companies. I realised the difficulty in comparing plans because insurance companies like to attach some features unique to the plan. By doing that, they can price their plans differently as nobody will know how much the unique feature cost. Its up to the Adviser's capability to sell on the unique feature which normally come at a price. This is normally the case for Traditional Policies like Whole Life and Education Plans.

To make a more direct apple to apple comparison, I decided to illustrate a Critical Illnesses Term Insurance here. Just to quote an example of a 30 yrs old male getting a 30years $250k CI, death, PTD coverage. The lowest I get is $1,084.60/yr and the highest I get is $1,854.00. The rest are in the region of $1,300 and $1,400. Some are guaranteed renewable, some are not. There are some difference between each plans but not as complicated compared to Traditional Policies.

After making these comparisons, I am more convinced on the importance of an IFA. I am wondering if I am the Tied Agent of that particular company that quote $1,854/yr for the same $250k CI cover that everyone offers, am I really caring for my customer by selling that Term Plan? If I am the tied agent of a company who only carry a few investment funds, am I really caring for my customer when they are forced to invest into regions that they are not comfortable with? As an IFA, we are able to help the customer save nearly $800/yr x 30yrs for the above case. This money can be well invested for better returns.

Since joining the industry, I had heard of many Sales Managers trying to justify the higher cost of insurance by comparing people buying Cars. There are people buying Mercedes and people buying Toyota, etc. They will create an impression to their new agents as if their plans are Mercedes and the lower cost plans as Perdua or QQ or whatever. I feel that all these comparisons are craps. Cars are something people judge on the price because of how they feel and the thousand factors behind the cost like Engine and fuel efficient, etc. Whereas Insurance are all similarly regulated in Singapore. Die means die, PTD means PTD. Whats there to feel about it and why should they be priced so differently.

However, IFAs have our problems too. This morning, one of my prospect I knew months ago called me and wanted to take up an annuity plan. We arranged for an appt this Friday. Before I hanged up the call, I told her honestly that I am in an IFA now. I spent nearly 5 minutes explaining what an IFA is and why we are actually of insignificant difference from a tied agent. She consulted her friends and called me shortly that she decided to cancel our appointment because I am not direct with the company anymore. She claims that I will not be able to help if there are problem with the proposal and future problems of the policy. This simply shows that many consumers are still not aware that IFA exist in Singapore and the part they play in the advisory process...


Anonymous said...

Poor Adrain, these are more of the things to learn.Your eyes will be opened. So what have you to say about
ntuc revosave and vivo life? These products have layers and layers of rubbish, first to hide the truth and then to justify the high cost clients have to pay for those useless frills.
You are not a salesman who relies on features to convince your clients.
You can see the products today are not getting better in real term instead they have rubbish
built into them to bluff the customers, right?
It is tough to be good guy, right? but you have to wait until the "garment" MAS decides it is enough.
Don't be discouraged ,Adrain.

alberttohyk said...

"PTD means PTD". there is one insurer whose PTD payout is something like 10% for the first 4 years, and 50% for the 5 year.

So PTD payout are not equal.

Anonymous said...

Many people thought that when you represent NTUC Income, you are in a better position to advise them when it comes to that company policy. Also, because the price of the policy is lumped together with the agent's commission so many people did not see the connection. But as an IFA you do not get paid by the insurance company but by your client so your client will think that she has to pay you in addition to the policy. Is there a difference in the price of an NTUC income bought from an NTUC Income agent and from an IFA like you?
Your job as an IFA will include having to debunk the myth that it is cheaper to buy direct from NTUC Income.
An honest person with your kind of personality has no place in the insurance business. Get out of there before it is too late.

Khiat Han Hwee Adrian said...

Hi Albert,

Thanks for highlighting this point to me. I had not read into the PTD payout yet. Some pay lumpsum, some don't. Another difference.

Hi Anonymous 11:07,

You got it just right, one of the rejection I got is they thought they are paying an extra layer of cost by going through me than from an NTUC Income agent.

Anonymous said...

Perhaps you would want to relate the story below to help your clients see the difference.

When you engage a plumber to fix a choked drain, it looked very easy to clear. You then pay him $200 for the job. Actually the prodding and poking probably costs only $10. The other $190 is actually paying him for the knowledge of where to prod and plunge in order to clear the choke.

Likewise, knowing what policies and from where to buy is the knowledge that is priceless as there is a compounding effect on making the right or wrong choice.

Roger Lim

Anonymous said...

Most plumbers took some time to graduate.He will not be given a job straight away but attached to an experienced plumber to under study him. From experience he knows where to poke and where the cause of the trouble and to fix the system.
But an insurance agent has only 3 months' theory and immediately upon licensing he goes to work and he begins to talk like a prostitute non stop..He summons his bullshiting skill and starts to look for his victim to PLUNDER and not plumber a problem.
Who is more trust worthy? Even you don't trust the plumber you only pay him after the fixing and on top of it there is a guarantee.
With insurance agents you don't know whether the product you bought will work for you and if you do , it will be after many years and by that time the insurance agent has already conned so many and has left the job.
That is why you need to look for a good agent and good agent you can't get from insurance companies especially NTUC where all the unethical and unscrupulous agents gathered there.
Look for ADRAIN.i can vouch for his honesty and competence.Very hard to find nowadays a person like him.

Khiat Han Hwee Adrian said...

Hi Roger,

Thanks for your comment and I will keep it in mind. You are right about the compounding effect of getting the wrong policies especially if undetected for a long time.

Hi Anonymous 1:44,

You had flattered me. Thee are so many more experienced and knowledgeable advisers quietly doing their work daily which we are not aware of. I am still far from them and have lots to learn.

Experience come with time and practice, new advisers who just started in the industry doesn't means they are not competent. They just need the right guidance and more chances. Not all are product paddlers.