Basics of Insurance

[moejoseph]

Thought i could start a thread to give people a glimpse of how the industry works, especially with quite a lot of negativity about insurance online.

Of course, pls correct me if i'm wrong in anyway. I am still learning, and hope to have a pleasant discussion with the community as well

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Personally, i feel that protection is the most important. By getting an insurance for protection, you transfer your risks of losing any future income to the insurance companies. Of course, the you will have to pay a fee (premium) for them to take up these risks. Do take care of your protection first, before thinking about saving and investment, and retirement. Because in case of any unfortunate events, esecially if death did not occur, all your savings, and even your family's, could be wiped clean.

Before recommending a product, agents have to do Financial Needs Analysis with their prospects/clients, and proposed products based on what clients need. Pls do not tell your agents that you are prioritizing savings or investments when you are not getting the proper coverage for protection (Death, TPD, CI). As agents, we can only advise clients to look at their protection gaps, but if clients insist to go for savings or investments plan instead, there is pretty much nothing we can do. We have advised accordingly, and we do not want to get infractions for force-selling a protection product which our clients mentioned they do not need.

So please ensure that your protection coverage is sufficient before looking into savings or investments. Of course, if you yourself can get better returns elsewhere, you do not need to get them from your agents.

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I am not here to change anyone's opinion, but to provide advice and discussion. Of course some may feel that the advice provided may be invalid, but there are always 2 sides to everything.

I don't say that something is good, but it is not entirely bad either. Ultimately, it is up to individuals to make their own decisions. Since everyone is here to learn and seek advice, we should all be more open about the different kind of advices we will receive.

While i do agree there are bad eggs out there, there are also a lot more who are working very hard, truly sincere. I've seen agents assisting their clients for claims (when there are online submission method), going the extra miles, and all the before and after sales services which are seldom mention online. These are the responsible agents who ensure that they work hard for the money they earned, and i believe they deserve to be commended.

I myself am quite new in this industry. While i will be focusing on commercial insurance more, personal insurance is still the basic, and i would like to assist anyone and learn at the same time, especially from the seniors out here. I don't want to be one of the bad eggs, so i hope the community can give me a chance to prove myself worth as well.

I believe the community can make a sound and balance judgement themselves. Feel free to ask questions here, but do have an open mind to take in all kind of responses. The forum will be a better place as well

 

[moejoseph]

Add-on:

With platforms such as DIY insurance, MoneyOwl where people can get their own insurance, it is definitely a good option to save on costs.

But i hope opportunities can be given to advisers first. Hear out a few different advisers for their views, see how they are like and if you feel that they are worth your commission, then get from them. Otherwise, you can always go back to the platforms to DIY yourselves, especially since you will have more knowledge and better know your needs after meeting the different advisers.

 

[akwl88]

Dear Mr. Tan,
As im currently a new agent with one of the big insurance companies in Singapore, im finding its a lot different from what I was told or expected.
For example at the start we were told to emphasize needs based selling in order to meet the needs of our clients (basically what the MAS regulations said). Later I found out that nobody does needs based selling and all we do is get clients to sign on empty forms so we can go back to the office to fill them up later. End result : Client is clueless about what their needs are and how we are meeting them, if at all. Instead of talking to them about what THEY want, we spend our time giving presentations about interest rates and talking about how our relative racked up a huge hospital bill without insurance to pay for it.


The commission structure is also highly flawed and contributes to the high turnover rate of agents in the industry. There is absolutely zero incentive or point for agents to recommend products with lower commission rates. In fact, meeting a client to sell a term plan actually loses an agent money(unless it is a very big term plan) because the commission rate is simply not high enough to pay for the time + bus/MRT fare involved.

In my case, neither I or my colleagues were ever given product training on anything but the products with the highest commission rates. Also, this is actually a job that requires you to spend money in order to make money. The problem is that for most new agents, they will not be able to set sufficient appointments or close enough cases to make money for the first 1-2 months at least, unless they have a lot of contacts who are interested. The end result is they spend hundreds of dollars in food and transport expenses, and in the end all they keep hearing is "I'm not interested", and quit because they are heavily in the red and still can't find people who wants to buy insurance. It would be better if new agents were given a basic allowance of $400-500 for living expenses till they are seasoned enough to close cases on a regular basis.

With the high turnover rate of agents in the industry there is a high incentive to simply not train agents properly since a manager is spending too much time training someone who, according to statistics, will quit in a month or two anyway. Simply give them basic training, send them on whatever appointments they can make, and see if it works out. If not, oh well, go recruit more people. I was given a few days of training total, only a few hours of which was product related, and was told to go to my first appointment with the aim to do a presentation and simply convince him to buy and not ask questions. I ended up making stuff up when the client started asking about things I was not taught about. I felt pathetic.

As it is I am currently in the unenviable situation where I spend money travelling back and fro my office, making phone calls, doing surveys, doing coldcalls, mainly to hear phones ringing that people never seem to pick up (I never had any idea how under-utilzied handphones were in Singapore before) and I am not even able to set a single appointment because people keep postponing or simply dissapear off the radar and never pick up their phones again. All of this is costing me money and worst of all I cannot see a way to improve my situation. I do not have any senior agents I can look to for guidance since they are all busy rushing to meet quotas and my manager just keeps telling me to go out, do more surveys, make more phone calls, find and meet people, etc, but it is simply not working.

I have no clue where, exactly, I am supposed to find people interested in buying insurance or doing investments since almost everyone i meet simply recoils in horror at the mere mention of "savings" "investments" "protection" or any other key word that you can possibly use.

A scary amount of middle aged adults still believe themselves immortal and that they cannot possibly get hospitalized or worse, affecting their ability to provide for their family. Most young working adults simply go from paycheck to paycheck, saving $0 every month and heading straight for disaster the moment a situation calls for usage of emergency funds which do not exist, or they just dump a token amount into their bank account every month that dissapears into the newest xbox or ipod the moment they get enough. Most young working adults do not even have a clue what medishield or medisave is, other than that it is something CPF related.

I feel like im constantly rolling dice and seeing if I can get a lucky combination just to find a single interested person. I would like to continue on in this line of advising people on financial planning, but I do not see how as most people simply want to go through life without any financial planning or insurance protection at all. And actually I don't even know whether what im doing can be considered financial planning anyway.

 

[havetheveryfun]

If you want others to change their opinions of the insurance industry, very simple, you can start by asking those insurance companies to remove their so-called "incentive trips" but instead save those money for the clients

second is to ask agents and insurance companies to stop recruiting downlines based on selling the dream of "financial freedom" and "passive income"

 

[moejoseph]

Dear Mr. Tan,
As im currently a new agent with one of the big insurance companies in Singapore, im finding its a lot different from what I was told or expected.
For example at the start we were told to emphasize needs based selling in order to meet the needs of our clients (basically what the MAS regulations said). Later I found out that nobody does needs based selling and all we do is get clients to sign on empty forms so we can go back to the office to fill them up later. End result : Client is clueless about what their needs are and how we are meeting them, if at all. Instead of talking to them about what THEY want, we spend our time giving presentations about interest rates and talking about how our relative racked up a huge hospital bill without insurance to pay for it.


The commission structure is also highly flawed and contributes to the high turnover rate of agents in the industry. There is absolutely zero incentive or point for agents to recommend products with lower commission rates. In fact, meeting a client to sell a term plan actually loses an agent money(unless it is a very big term plan) because the commission rate is simply not high enough to pay for the time + bus/MRT fare involved.

In my case, neither I or my colleagues were ever given product training on anything but the products with the highest commission rates. Also, this is actually a job that requires you to spend money in order to make money. The problem is that for most new agents, they will not be able to set sufficient appointments or close enough cases to make money for the first 1-2 months at least, unless they have a lot of contacts who are interested. The end result is they spend hundreds of dollars in food and transport expenses, and in the end all they keep hearing is "I'm not interested", and quit because they are heavily in the red and still can't find people who wants to buy insurance. It would be better if new agents were given a basic allowance of $400-500 for living expenses till they are seasoned enough to close cases on a regular basis.

With the high turnover rate of agents in the industry there is a high incentive to simply not train agents properly since a manager is spending too much time training someone who, according to statistics, will quit in a month or two anyway. Simply give them basic training, send them on whatever appointments they can make, and see if it works out. If not, oh well, go recruit more people. I was given a few days of training total, only a few hours of which was product related, and was told to go to my first appointment with the aim to do a presentation and simply convince him to buy and not ask questions. I ended up making stuff up when the client started asking about things I was not taught about. I felt pathetic.

As it is I am currently in the unenviable situation where I spend money travelling back and fro my office, making phone calls, doing surveys, doing coldcalls, mainly to hear phones ringing that people never seem to pick up (I never had any idea how under-utilzied handphones were in Singapore before) and I am not even able to set a single appointment because people keep postponing or simply dissapear off the radar and never pick up their phones again. All of this is costing me money and worst of all I cannot see a way to improve my situation. I do not have any senior agents I can look to for guidance since they are all busy rushing to meet quotas and my manager just keeps telling me to go out, do more surveys, make more phone calls, find and meet people, etc, but it is simply not working.

I have no clue where, exactly, I am supposed to find people interested in buying insurance or doing investments since almost everyone i meet simply recoils in horror at the mere mention of "savings" "investments" "protection" or any other key word that you can possibly use.

A scary amount of middle aged adults still believe themselves immortal and that they cannot possibly get hospitalized or worse, affecting their ability to provide for their family. Most young working adults simply go from paycheck to paycheck, saving $0 every month and heading straight for disaster the moment a situation calls for usage of emergency funds which do not exist, or they just dump a token amount into their bank account every month that dissapears into the newest xbox or ipod the moment they get enough. Most young working adults do not even have a clue what medishield or medisave is, other than that it is something CPF related.

I feel like im constantly rolling dice and seeing if I can get a lucky combination just to find a single interested person. I would like to continue on in this line of advising people on financial planning, but I do not see how as most people simply want to go through life without any financial planning or insurance protection at all. And actually I don't even know whether what im doing can be considered financial planning anyway.

Not sure if this is your own experience, but i feel sorry for whoever is in the mentioned organisation/team.

Many people join the industry thinking that they could get rich easily, but they are wrong. Nothing is easy, and being in an industry with many negative reviews, it is just much harder.

When the team did not teach the correct stuffs, the agents and whole industry suffers. Sadly that is how majority works, which is why i am grateful for my team, that changes my views and give the industry a shot.

The team that an agent join is very important as well. That could determine if an agent leaves the industry or stay truly committed for years. Mine may not be a great team in term of sales, but their beliefs in being sincere and committed to clients, and upholding these beliefs, are what makes me join them.

Of course i could be wrong over time, but i don't regret my current choices made

 

[JuniorLion]

The insurance companies can set things right by changing their incentives structure.

 

[iamveryguailan]

Add-on:

With platforms such as DIY insurance, MoneyOwl where people can get their own insurance, it is definitely a good option to save on costs.

But i hope opportunities can be given to advisers first. Hear out a few different advisers for their views, see how they are like and if you feel that they are worth your commission, then get from them. Otherwise, you can always go back to the platforms to DIY yourselves, especially since you will have more knowledge and better know your needs after meeting the different advisers.

How can I trust tied agents to give me a fair and objective assessment when they are already inherently biased right from the start to push their principal’s product? Also, with commission structures, what stops agents from trying to paint a picture that I need a plan that gives them the highest commission. Remember, layman is called layman for a reason. With sufficient persuasion, framing of problem and hiding of info, any layman can be persuaded into getting an unneeded plan that gives the agent that incentive trip, MDRT, and his comms. Companies even give additional incentives on plans they want to push for more. Comms range between 1% to 50% isn’t it? Haven’t even add in special incentives.

 

[iamveryguailan]

The idea of insurance is good as it is a risk transfer tool. The way of selling it remains skeptical. I believe it is a matter of time when automated tools, AI etc gains mainstream traction. In fact many of my friends (in mid 20s) have already chosen to buy online / or from IFA with more options.

Many companies are already opening their traditional / basic term/CI plans via online direct purchase. I Guess as the generation becomes younger and more savvy, more will cut out the middleman

 

[Shion]

Term + PA + H&S

 

[TabascoSauce]

Insurance for protection is good. Problem is the clear conflict of interest between agents and clients.

I have been through an internship with one of the major insurer.
It’s clear that all the talk about need base analysis, helping clients achieve financial goals are just what the agents tell themselves to feel good.

The ‘training’ I have been through is all about money and selling. Minimal time was spent on understanding the products and who Are they suitable for.

And I’m pretty sure most agents financial knowledge is at most at finance 101 level.

 

[akwl88]

Anonymous said...

It takes a robber to know another robber.

I am ex-insurance agent (now retired liao), and I can say that life insurance is something that is actually easy to understand and can be cheap too. Don't really need agents or consultants. Unfortunately, insurance companies keep a lot of things hidden and they like to paint an aura of complexity and professionalism around insurance products. This is to maximise profit margins -- just ask any insurance CEO whether term products or par products give higher profit margins?

It is dis-ingenious for agents to claim they only earn 40% or 50% commission. Truth is that for most par products, you earn commission over 5-6 yrs. Total commission is at least equivalent to the annual premium paid by customer. Usually it is 1.5X the annual premium.

E.g. Most of the time I sold wholelife, limited wholelife and endowments. For a 30-yr old customer, a $200K limited wholelife is easily $3+K per year. My first year commission already $1.5+K --- another $1.5K over the next 4 years.

Another example, for somebody interested in investments. I pushed regular ILPs in hot funds -- just show the last 12 months charts and they all salivate already. Many middle-income customers willing to put in $1K every month -- just con them it is killing 2 birds with 1 stone: life insurance + retirement savings at 1 go. Imagine, $12K API -- for certain insurance companies that can be $6K to $9K first year commission liao.

Friend, if you say you never make $2+K commission from a single insurance product, you are either a liar or a lousy salesman.

And yes, I told my kids never to buy par products for insurance cover. At most only certain endowments as a small percentage of their holistic accumulation planning. As much as possible, they all buy insurance online or directly from insurers, bypass the talk-cock-sing-song agents who are 99.5% only interested in lining their pockets with high commissions, and couldn't care less whether the coverage is 10X annual income or not.

Take it from me, coz I used to be one of these conman.

 

[moejoseph]

Anonymous said...

It takes a robber to know another robber.

I am ex-insurance agent (now retired liao), and I can say that life insurance is something that is actually easy to understand and can be cheap too. Don't really need agents or consultants. Unfortunately, insurance companies keep a lot of things hidden and they like to paint an aura of complexity and professionalism around insurance products. This is to maximise profit margins -- just ask any insurance CEO whether term products or par products give higher profit margins?

It is dis-ingenious for agents to claim they only earn 40% or 50% commission. Truth is that for most par products, you earn commission over 5-6 yrs. Total commission is at least equivalent to the annual premium paid by customer. Usually it is 1.5X the annual premium.

E.g. Most of the time I sold wholelife, limited wholelife and endowments. For a 30-yr old customer, a $200K limited wholelife is easily $3+K per year. My first year commission already $1.5+K --- another $1.5K over the next 4 years.

Another example, for somebody interested in investments. I pushed regular ILPs in hot funds -- just show the last 12 months charts and they all salivate already. Many middle-income customers willing to put in $1K every month -- just con them it is killing 2 birds with 1 stone: life insurance + retirement savings at 1 go. Imagine, $12K API -- for certain insurance companies that can be $6K to $9K first year commission liao.

Friend, if you say you never make $2+K commission from a single insurance product, you are either a liar or a lousy salesman.

And yes, I told my kids never to buy par products for insurance cover. At most only certain endowments as a small percentage of their holistic accumulation planning. As much as possible, they all buy insurance online or directly from insurers, bypass the talk-cock-sing-song agents who are 99.5% only interested in lining their pockets with high commissions, and couldn't care less whether the coverage is 10X annual income or not.

Take it from me, coz I used to be one of these conman.

I begged to differ on liar or lousy saleman part. Yes there are plans that give high commission, but those are usually over long term, and companies have been cutting down on agents' commission over the years, at least for the insurer i am with. A >25 premium term whole life only get us 46.5% in the first year, 23.5% in the 2nd, and 5% from the 3rd to 6th years. The total is not even a year of premium.

Personally i advise my prospects on shield and eldercare supplements first, before anything else. So yes i am probably one of the "goondu" that is not earning $2k+ per policy case closed yet. Because i value educating my prospects on the basics first, and only when they are more comfortable (financially and with me), then they seek my advice on other areas.

The idea of insurance is good as it is a risk transfer tool. The way of selling it remains skeptical. I believe it is a matter of time when automated tools, AI etc gains mainstream traction. In fact many of my friends (in mid 20s) have already chosen to buy online / or from IFA with more options.

Many companies are already opening their traditional / basic term/CI plans via online direct purchase. I Guess as the generation becomes younger and more savvy, more will cut out the middleman

I agree with this, and am personally looking forward to the day when more automated tools are available and the industry can be more simplified. Not just insurance industry alone but other industries who are currently using middlemen as well.

Insurance agents are also a form of salesman, and similar to those other B2B or B2C salesmen, they are only trained on their company products, making them believe that they are the "best". It is good to see more regulations put up by MAS and relevant authorities to clamp down on errant agents recently.

The first step could be to remove the tied products first, which is why there have been a rising number in independent FAs. But then, it is sad to see insurance companies instead give out much more commission to these Independent FAs than their own tied agents, so that they can push for their products (based on what i know). Doesn't these sort of defeat the purpose of an Independent FA? Which is also a reason why some agents leave by the team to jump over to Independent FA firms.


Just being transparent with some of the figures here, which hopefully can provide an insight especially to those pondering on how things really work in the industry.

 

[havetheveryfun]

Insurance agents are also a form of salesman, and similar to those other B2B or B2C salesmen, they are only trained on their company products, making them believe that they are the "best". It is good to see more regulations put up by MAS and relevant authorities to clamp down on errant agents recently.

pls advise why agents are called "financial planners" then.. what finance do they plan..

 

[MrPippen]

pls advise why agents are called "financial planners" then.. what finance do they plan..

Not an agent, not defending them or anything, just stating my two cents.

1. In today's day and age, positions have all kinds of weird names. If one still believe the title corresponds directly then..

2. Insurance as a form to protect is a form of financial planning.

That said, it is very debatable as to how ethical the sales are being generated in the insurance industry.

 

[BBCWatcher]

It's terrific that there's at least some awareness that insurance should be insurance ("protection"). It's not terrific that we're already 14 posts into this thread and disability income insurance (DII) hasn't been mentioned even in passing.

 

[moejoseph]

It's terrific that there's at least some awareness that insurance should be insurance ("protection"). It's not terrific that we're already 14 posts into this thread and disability income insurance (DII) hasn't been mentioned even in passing.

Personally i will group DII together under "protection". Different people will have different priorities under "protection".

As "Protection" itself is quite a big category, will need some time to sort the info out as well. Sorry about it!

Welcome inputs from the community too!

 

[lifeishard]

@moejoseph, you are not the first and won't be the last to be wasting your time and efforts here...

I'd advise you to go spend the time doing what interest you than to try to 'educate, share' with the lot here.

 

[moejoseph]

@moejoseph, you are not the first and won't be the last to be wasting your time and efforts here...

I'd advise you to go spend the time doing what interest you than to try to 'educate, share' with the lot here.

Understand where this is coming from, but I don't want to give up without even trying.

Especially in this industry, since i am already out swimming in the ocean, i must make sure i give my best to swim all the way, to be at least answerable to my clients.

Don't worry i will take things here as a learning platform as well

 

[JuniorLion]

Moejoseph, the folks frequenting MM are not your typical noobs.

You can't generate leads from here. You are not the first one trying, and no, you didn't stumble upon a gold mine.

 

[akwl88]

when new agent comes here and tout heavily about ilp, you know he/she is not very financially savvy and only cares about the huge comms ilp brings to his/her pocket

kekeke