3 Biggest disappointments of the Life Insurance Industry that has to change

Posted 3 August, 2017 by Clearly
in Opinion

As a Singaporean, what comes to your mind when it comes to disappointments?

For one, these would be at the top of my list:

Signaling system efficiency of SMRT (How difficult can it be, really?)
My annual bonus (never fails to let me down!)
Needing a Committee to certify your ethnicity (I would just check my IC, duh)
Finding a heart bypass that costs only $8 (Can’t even get a movie ticket that cheap anymore)
Pokemon GO is still a “Thing” (SERIOUSLY, WHY!!!)

However as a Life Insurance educator, what disappoints me about Life Insurance in Singapore is totally different – with far more serious consequences.

Let the national sport of complaining begin.

 

Disappointment 1: Road shows are still a thing

 

Ever found yourself heading down to NTUC just to pick up a couple of groceries, but accosted by several well-dressed people wanting to conduct a survey?

Some insightful survey it turns out to be, and soon after you are led to some tables and chairs and made to sit through a presentation on how to best utilize your idle cash.

 

You just bought ice cream and milk, lets wrap this up before it melts in your car ok? Sign here, here, and here.

You just bought ice cream and milk, lets wrap this up before it melts in your car ok? Sign here, here, and here.

 

Seriously, this mode of selling insurance has to stop. I refer to all forms of unsolicited selling of insurance, which includes:

Door Knocking
Street Canvassing (You see a lanyard, you run!)
Roadshows (No slow cooker is worth the agony of a wrongly bought policy)

 

Are these forms of sales effective?

As you can imagine, the rejection rates are crazily high. But since it is a numbers game, these practices persist to this very day, since there seems to be no shortage of energetic Insurance agents.It also helps that there is a certain someone born every minute.

Are these forms of sales professional? 

Let’s answer this using a comparison with other professional fields.

  • You won’t see any doctor standing on a street corner offering to take your blood pressure for free
  • A lawyer won’t be going around door to door offering his will writing services to you.
  • And when was the last time you heard of an accountant setting up a booth next to a supermarket to garner business?

If financial planners want to be properly regarded in the same breath as doctors, lawyers, and accountants, then these unsolicited sales practices have to stop.
I understand why these things are done, having been in the industry for most of my career. But moving ahead, it really has to stop. For the professional image of the industry. For the well being of the customer, who often buys something due to pressure (oh yeah, let’s not pretend that it does not exist) or due to a hasty decision.

Agents at these roadshows are pressured to sell, and sell hard, to cover their fixed costs. Customers are more often than not, enticed by freebies and have to discuss their financial matters in a noisy, crowded environment.

It may have worked before, but times have changed. Our policemen no longer wear shorts. So perhaps we should stop selling financial products out in the open, like unsolicited touts.

 

Disappointment 2: (True) Transparency is an illusion

 

Question: What do you think is as old as the concept of insurance itself? (BTW insurance dates waaay back to the Babylonian times, in 1750 BC)

Answer: Complaining about Insurance policies

A bit tongue in cheek, but I don’t think it is necessarily inaccurate. Why do we gripe so hard about Insurance policies?

The answer is deceptively simple. We didn’t really understand it before buying. We don’t really know the features, and we are not really sure about the returns.

 

Instead, only realize the truth. There is no spoon. Likewise, there are no real returns in the BI

Instead, only realize the truth. There is no spoon. Likewise, there are no real returns in the BI

 

The fault really lies with 2 parties – the buyer (us) and the seller (the insurer). (I’ll address the lack of understanding from the buyers in the next point)

The biggest complaints about Life Insurance usually are reserved for the poor rates of returns provided by par plans, which is no coincidence since the true level of transparency in these plans is lower than your average Zimbabwe politician.

 

>> Click here to learn how to  read a Benefit Illustration table <<

 

Insurers are still using an outdated method of demonstrating potential returns by means of illustrated rates. This causes all sorts of problems because buyers usually see 2 rates (One high, one low) on the table itself – and guess which one is promoted more heavily by the selling party (agent)?

Worse still, the illustrated rates don’t correspond to the actual rates of return provided by the policy. I had to solve the mystery here on my own, and the true figure is not even close to illustrated rates.

 

Why is this a disappointment? Because I just think that it would be so easy just to be transparent and upfront.

Insurers should really tell us:

Thanks for your business and support.
You are buying into a par plan, which means some part of your premium will go into protection, and the rest will go into investment.
The actual rate of return will not be anything like what our par fund performs, so please set your expectations right.
We will provide a plain English version of the policy documents so you understand perfectly what is going on, but we will rely on our lawyered-up version should we need to make an official decision.

 

Throw out the silly illustrated rates that don’t matter.
Tell the consumer that mixing Insurance with Investment means generally lower returns compared to other asset classes.

It’s ok to come clean and be transparent since we are all adults.

 

Disappointment 3: Life Insurance Education is not available on a large scale

 

Everyone wants to get rich. And get rich quick. Hence there is no dearth of programs, training classes, systems, and what-have-you teaching people to multiply their investments and own property with no money down.

That’s great, because investing is how many of us get wealthy. But what about the more important (albeit less exciting) part about taking care of one’s personal insurance first? Who goes around teaching us how NOT to get poor, before teaching us how to get rich?

 

Attendance for Life Insurance 101

Attendance for Life Insurance 101

 

Think hard into the situation and you will probably see the magnitude of the problem. In all our years of schooling, we will hardly receive any financial education (not even on the perils of credit card debt). Once we are out into the working world, we are bombarded with get-rich-quick trading/property/cryptocurrency investment schemes – that’s our investment education right there. Not ideal, to say the least, but there are plenty to choose from.

How about Insurance education? That is left to the good (or otherwise) agent(s) that you may meet during the aforementioned roadshow/door knock. If you ask me, that really sucks. The bedrock upon which you will need to base your financial security on is left to a complete and utter stranger which may or may not be acting in your best interests. There are plenty of great agents around, but there are also black sheep which tarnish the reputation of the industry.

We should all learn how to manage risk (Insurance) before learning how to take on extra risk (Investment). But it has gone all lop-sided and topsy turvy.

If you ask me, this last point is really the crux of the matter. If we as a nation really started to pay more attention to financial education, with Insurance as the starting point, it would lead to a virtuous cycle which more or less eliminates the first 2 disappointments.

With the general populace well-versed in Insurance, people will become more receptive to it.
Agents will not have to resort to unsolicited selling but focus on giving good advice.
Insurers will have to be more transparent and not hide key figures behind useless tables.

Everyone lives happily ever after. End of story.

 

The point of all this?

 

It is ok to be disappointed. But the key is not to remain that way. Whether you are an agent, or an insurer, or a layperson, we can all do our part to make Life Insurance less disappointing and more celebrated.

 

The Key to success: Continuous action

The Key to success: Continuous action

 

As an agent, do consider the way you conduct your business.

As an insurer, do consider how you can start to present key data in a clear, concise, and truly transparent manner.

As a layperson, do consider putting in some time and effort into educating yourself about the importance of Life Insurance.

Till then, we will continue working with agents, insurers, and consumers to make Life Insurance more palatable.

 

www.ClearlySurely.com aims to eradicate the knowledge gap between consumers and Life Insurance. Our Vision is that one day, every Man, Woman, and Child will be properly insured.

  1. Sinkie

    Frankly it’ll be hard for any insurance company to sell any par plans (wholelife, endowments) if they were to show the actual maturities & returns, especially in the last 17 years.

    Any senior underwriter or member of the investments dept in an insurance company will be able to provide you with the actual past figures for standard life, and can also graph it up to see the trend. Which has gotten quite bad since the AFC.

    Becoz of the many financial upheavals in the last 20 years, insurance companies operating here have become very conservative in dishing out declared bonuses, retaining more of the excess returns for “bad times” like the GFC. What this means is that yield for matured long-term (>20 yrs) par policies have dropped from 5%-6% in the mid-1990s to now 2%-3%.

    Patiently putting in big bucks for 30 years only to get back compounded yield of only 2.5% is guaranteed to raise blood pressures.

    Moving forward, I foresee the more honest & truthful insurance companies focus more on pure protection term plans rather than harping on par plans or ILPs. Currently par plans & ILPs are pushed becoz these give a higher profit margin to insurance companies & higher commissions to salesmen.

    1. Clearly *

      Well said, with nicely reasoned logic. That is exactly the direction we hope to see more insurers take – Insurers should just focus on protection, not investment.

  2. CTC

    Hey, nice article there. Your very 1st point got me thinking, what other modes of prospecting can insurance agents take if they do not adopt the practices which you frown upon? I’m asking from a lay person’s point of view because I know prospecting is the lifeblood of every business. Having no leads, no sales, will eventually lead to no income. Warm market? Those will eventually dry up. I’m genuinely curious as to what modes of prospecting you would recommend for the insurance industry as you did not offer any suggestions or solution to your 1st point.

    Looking forward to your reply.

    1. Clearly

      Hello! Thanks for your kind words.

      Actually there are plenty of things that Insurance agents and Financial Planners can do. Running seminars about finance is one. There are a broad array of topics that are relevant to so many people – like Retirement, Legacy planning, CPF usage, the list goes on.

      They can build their own online brand. They can work on their referral program. They can partner with property agents and development firms, or HR firms.

      In this day and age, there are countless ways to start advertising oneself. Roadshows and other unsolicited methods of leads prospecting are beginning to fall off the cliff as far as efficacy is concerned.

      (Today’s youth also are not keen on cold calling too – so isn’t it time for agents to refresh their methodologies?)

      1. Johnny

        Here u are suggesting methods such as referrals, partnering with HR property agents. I wonder if u ever tried seeing the quantitative effectiveness of these methods of prospecting compared to canvassing or direct approach methods.

    1. Surely

      It has the potential to change the industry but not on its own. it must be coupled with fee based advisory or it may not be a popular choice due to the perception that financial advice is ‘free’ in the current environment

  3. Roger

    There are some truth in the articles. But there are still distorted facts written. And also breach of personal privacy posting photos of the public. Clearly not best place to read up on financial matters. I noticed a button comparing price of financial products. But yet the article still make comparison with Doctors? Do you visit Doctors around comparing their fees?

  4. Ad

    Why are the public against insurance agents only? As far as i know most of the mis-selling comes from the bank too, given that the products they sell from from insurance companies (Side note: USA sub-prime mortgage situation in 2008 was due to negligence of bankers). In the end its not the profession you have to slate, but rather the person.

    1. Surely

      Intriguing question indeed.

      Of course, we need to know if misselling is more prevalent in insurance or banking industry first.

      Let us see if we can find an answer to that

  5. Johnny

    Clearly surely is obviously run by a group of disgruntled ex agents or by an IFA. There is nothing wrong with roadshows and there are many safeguards imposed by the MAS to protect consumers.

    Clearly surely has to drop shoving done their biasness 2wards the reader. If u want to be a respected source of information pls act fairly and sensible in your blog posts. You sound just as ignorant as Lorna tan or Christopher tan of providend.

    1. Surely

      We doubled-checked our credentials and unfortunately we did not meet your expectations of us being an ex-agent or IFA.

      On the other hand, we can’t say that you must be a current agent based on your obsession over roadshows. It looks like most successful advisors we come across, spend more time with their clients than on roadshows but hey, what do we know right?

      If you have gone through more than 1 article, it is clear that we have been criticized for being pro-agents and now being anti-agents. If that is not a benchmark for our honest unbiased reporting, we don’t know what is.

  6. Johnny

    Clearly surely you wish to be a recognised spoke person for the industry you have to stop being biased. As an fc for I would say more than 9 years..seminars and advertising online are done mostly by ifa and its not the most effective which explains why ifa has the smallest share in the market.

    Just because a person does Roadshow it does not mean he/she Spends less time with their clients. Your editors really got to get your head out of the gutter, improve your English and adopt a broader perspective before being known as a financial planning blog or you will continue to be a joke among financial practioners.

    1. Surely

      Wrong, Johnny. We never want to be a spoke person for the industry. That is the job of LIA in case you have no idea despite being in the business for 9 years.

      IFA is not the smallest distribution channel – gotta check your facts. And it is fast growing in terms of market share. But hey, don’t let facts get in the way of your illusions.

      We never mention that a person who does roadshows spends less time with their clients. This, apply your Stickman argument elsewhere.

      Oh lastly, making a new disparaging comment cuz you have no answer to our last reply to you shows how well you actually know the industry. Nuff said.

      Cheers and have a great day at your roadshow!

      1. Johnny

        If you are including the Aviva, aia FAs as part of calculation than you are right. And as far as your argument goes about being the fastest growing its because more tied are becoming FAs.

        If we are only talking about firms like providend, promiseland, finexis, pias I think we all know the relative size of business contributed by these small FAs

        2nd your point about the successful agents you have come across who spend more time with their clients than on roadshow. Those kind of agents might already have a huge warm market or have the means to excess people with a better disposable income and those successful agents you meet may not have to do roadshows.

        In one of your earlier comments to somebody above you replied to this person who asked how else to bring in revenue other than roadshow. U replied by going online and by partnering with HR staff etc. It doesn’t always work that way. Sometimes u need the human touch and that’s where roadshows canvassing come in.

        And 1 more thing all your talk about financial practioners being looked at at the same light as doctors and lawyers, now that is a straw man argument.

        Insurance is a product that needs to be sold and not bought if it were otherwise, don’t you think FWD on line Policies would be flying through the roof right now?

        As for your last para about being criticized for being pro and anti agent.

        I honestly don’t think you guys are honest and unbiased. I feel you guys are just a mouth piece for the IFAs shoving down their fee based anti – ilp agendas.

  7. Johnny

    I wonder if the clearly surely team is a staff of providend or promiseland or even alpis financial . 2 small time firms who have a huge online presence but with very little to show for.

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