Someone posted a comment that the insurance c0mpany has to make a reasonable margin to cover its expenses and make a profit. I agree.
The cost of a life insurance cover for a person to provide an adequate sum for a family should be $200 a year (e.g. to cover $300,000). It is all right for the insurance company to charge $300 a year, and have $100 as a margin to cover expenses and earn a profit.
Unfortunately, most insurance products (e.g. whole life, endowment or investment-linked policies) require a premium of $3,000 to provide the same amount of cover. About $6,000 is taken away to pay the commission and marketing expenses. This is too expensive and does not provide value to the consumer. These policies should be avoided. The agent who sell these policies are not taking care of the interest of their clients.
I hope that insurance companies and agents will act in the interest of consumers and offer the right products.
Thursday, April 17, 2008
Petrol consumption
During the past 14 days, my Toyota Camry car consumed $105 in petrol (50 litres) and travelled 442 kms. The consumption is 8.7 km per litre ($2.08), or 24 cents per km.
Call centers of insurance companies
I gave a practical project to the studnets in my class on Risk Management & Insurance. They had to call the insurance companies in Singapore to ask for quotations for motor, term, accident and medical insurance.
The general conclusion from the projects are:
a) Most insurance c0mpanies were not well organised to handle direct enquiries
b) Many companies took a long time to respond to a simple requests
There is big potential for a new insurance companies to develop its business by organising a well managed call center that can respond to direct enquiries from customers.
The general conclusion from the projects are:
a) Most insurance c0mpanies were not well organised to handle direct enquiries
b) Many companies took a long time to respond to a simple requests
There is big potential for a new insurance companies to develop its business by organising a well managed call center that can respond to direct enquiries from customers.
Risk Management & Insurance at SMU
I taught a class of 29 students at SMU on the subject Risk Management and Insurance. I have completed all the classes. The final exmaination was held yesterday. I had to invigilate it.
It was quite enjoyable. I learned a lot about the subject as well. I had to brush up on the theory to present to the class. The students enjoyed the practical aspects of the subject that came from my personal experience.
I intend to repeat the course for the next semester. It will be easier for me (having done it already) and more interesting for the next batch of students.
It was quite enjoyable. I learned a lot about the subject as well. I had to brush up on the theory to present to the class. The students enjoyed the practical aspects of the subject that came from my personal experience.
I intend to repeat the course for the next semester. It will be easier for me (having done it already) and more interesting for the next batch of students.
Friend gave bad advice
Hi Mr. Tan,
Being a fresh grad (with loans to bear), it is really not easy for me to part with the $2000 premium paid so far. Your kind advice has made me reconsider my choice. How did you arrive at the net yield/gross yield? I tried to calculate it but could not get it right. I just want to understand the logic behind and fully convince myself to give up this plan, $2000 and possibly my friendship with that agent friend.
REPLY
The yield is calculated using a financial calculator. Some of your colleagues have this calculator and will be able to show you how the yield is calculated.
Please help to pass the message to your other friends. Their priority is to pay off the loan and not to waste money on a life insurance policy that takes away so much savings to pay commission to the agent.
If you need life insurance protection, you should buy a decreasing term insurance, as explained in this FAQ:
http://www.tankinlian.com/faq/savings.html
Being a fresh grad (with loans to bear), it is really not easy for me to part with the $2000 premium paid so far. Your kind advice has made me reconsider my choice. How did you arrive at the net yield/gross yield? I tried to calculate it but could not get it right. I just want to understand the logic behind and fully convince myself to give up this plan, $2000 and possibly my friendship with that agent friend.
REPLY
The yield is calculated using a financial calculator. Some of your colleagues have this calculator and will be able to show you how the yield is calculated.
Please help to pass the message to your other friends. Their priority is to pay off the loan and not to waste money on a life insurance policy that takes away so much savings to pay commission to the agent.
If you need life insurance protection, you should buy a decreasing term insurance, as explained in this FAQ:
http://www.tankinlian.com/faq/savings.html
Demand a net yield of 3% on your regular savings
If you pay premium towards a "savings-type" life insurance policy, you should demand a net yield of 3% for 10 years. These products include endowment, whole life, investment-linked, critical illness and their variations, such as limited premium and cash back.
If you save $100 a month for 10 years, the life insurance policy must give you a net return of at least $13,900. Your total savings is $12,000. The gain is $1,900 (i.e 15.8% on $12,000). If you are not getting this gain of 15.8% on the total savings, you should avoid the life insurance policy.
If you save $300 a month, you should check if the cash value at the end of 10 years is at least $13,900 X 3 = $41,700.
Most life insurance products give you a poor yield, as a large portion of your premium is used to pay commission to the agent and the agency manager. The true cost of the life insurance protection is a small proportion of the premium that is spend in marketing and sales.
Lesson: Demand a net yield of 3% on your savings. Look at the benefit illustration on your life insurance policy. Look at the figures for 10 years duration. Compare the cash value with the total premiums. If you do not get the gain of 15.8%, do not buy the life insurance policy.
If you save $100 a month for 10 years, the life insurance policy must give you a net return of at least $13,900. Your total savings is $12,000. The gain is $1,900 (i.e 15.8% on $12,000). If you are not getting this gain of 15.8% on the total savings, you should avoid the life insurance policy.
If you save $300 a month, you should check if the cash value at the end of 10 years is at least $13,900 X 3 = $41,700.
Most life insurance products give you a poor yield, as a large portion of your premium is used to pay commission to the agent and the agency manager. The true cost of the life insurance protection is a small proportion of the premium that is spend in marketing and sales.
Lesson: Demand a net yield of 3% on your savings. Look at the benefit illustration on your life insurance policy. Look at the figures for 10 years duration. Compare the cash value with the total premiums. If you do not get the gain of 15.8%, do not buy the life insurance policy.
Not able to offer the Rider
Hi Kin Lian,
Having dealt with and experienced your customer- centric approach, it’s with disappointment that you are no longer helming Income.It’s a real great loss to NTUC policy holders and NTUC.
I am hitting a brick wall with NTUC.I have a question and would appreciate your advice. I was trying to apply for a rider for my NTUC hospital insurance policy transferred from CPF Medishield plus.
I had an angioplasty some 18 years ago. My cardiologist offered his professional assessment that as the angio was done a long time ago, the condition has stabilized and there are no symptom suggesting a recurrence.
NTUC rejected rider outright. I even sugested to NTUC if they are concerned about heart disease I am open for a rider that limits heart disease to existing plan. My sense NTUC just taking an easy way out to blanket reject all prior conditions without any interest to study each case professionally.
Its simpler to advise anyone with prior conditions not to apply.Appreciate your suggestions how best to move forward.
REPLY
You are already covered under the main Shield plan. There is no need for you to take the rider (to cover the Deductible). If you need to be bospitalised, you can pay the deductible from your Medisave account. The larger bills can be paid by the main Shield plan.
There is no point to buy the Rider, if NTUC Income is not keen to offer it to you. All the best.
Having dealt with and experienced your customer- centric approach, it’s with disappointment that you are no longer helming Income.It’s a real great loss to NTUC policy holders and NTUC.
I am hitting a brick wall with NTUC.I have a question and would appreciate your advice. I was trying to apply for a rider for my NTUC hospital insurance policy transferred from CPF Medishield plus.
I had an angioplasty some 18 years ago. My cardiologist offered his professional assessment that as the angio was done a long time ago, the condition has stabilized and there are no symptom suggesting a recurrence.
NTUC rejected rider outright. I even sugested to NTUC if they are concerned about heart disease I am open for a rider that limits heart disease to existing plan. My sense NTUC just taking an easy way out to blanket reject all prior conditions without any interest to study each case professionally.
Its simpler to advise anyone with prior conditions not to apply.Appreciate your suggestions how best to move forward.
REPLY
You are already covered under the main Shield plan. There is no need for you to take the rider (to cover the Deductible). If you need to be bospitalised, you can pay the deductible from your Medisave account. The larger bills can be paid by the main Shield plan.
There is no point to buy the Rider, if NTUC Income is not keen to offer it to you. All the best.
Subscribe to:
Posts (Atom)