Insurance agents are just one rung below telemarketers on the list of people Singaporeans avoid… until they actually need them.
Like them or loathe them, there's no question that having a good relationship with a trusted agent is indispensable in Singapore, where medical insurance is a must for most.
That's why Singaporeans should not just ignore the recent news that a whopping 300 Great Eastern insurance agents were recently poached by AIA Financial Advisors.
These agents were lured with generous cash bonuses in exchange for serving a five year bond after which they could have to pay back these generous bonuses if they don't meet their sales quotas.
This mean we can expect insurance agents to be even more determined to meet their sales quotas, possibly at the expense of their clients.
Even if your own agent is not from Great Eastern, it's worth knowing that aggressive poaching exercises seem to be the new normal. Just last year, 250 Prudential agents got poached by Aviva.
Here's three things you need to know before you buy your next insurance policy.
THE STIGMA OF INSURANCE AGENTS SELLING UNSCRUPULOUSLY IN ORDER TO EARN COMMISSIONS IS GOING TO GET WORSE
Anybody who's ever gone for an appointment with an insurance agent would have noticed that, no matter what insurance policy you were initially interested in at the start, the agent mentioned investment-linked life insurance.
That's not because investment-linked life insurance is such a fantastic idea. It's because these products earn insurance agents very high commissions.
That's why you should never take at face value every recommendation an insurance agent offers you.
There have been several cases of cheating and mis-selling in Singapore that have gone all the way to the courts. And even if your agent doesn't do anything that could land him in jail, the onus is on you to check that you're buying a plan that actually benefits you and not just the agent.
The agents who recently jumped ship were dangled attractive bonuses-but the catch is that they need to meet sales targets in the next few years in order to keep them. This could lead to more cases of mis-selling as insurance agents scramble to meet their sales targets.
To make matters worse, these agents are technically not allowed to bring along their existing clients, who remain the clients of their previous agency.
That means that the agents are losing their entire client network, which some have been building for years or even decades. Add to that the pressure of their new sales targets and it's not not hard to see how many might be driven to mis-selling.
NEVER CANCEL AN EXISTING INSURANCE POLICY JUST BECAUSE YOUR AGENT SAYS YOU SHOULD
While they're not supposed to do so, a number of insurance agents might try to convince some of their former clients to give up their current insurance policies and take up a policy at their new company, which might not be in the client's best interests.
Don't ever do this without doing your research, even if an agent is a close friend or family member.
Cancelling a medical insurance policy, for instance, make cause you to be uninsurable for medical conditions that were discovered after you signed up, since a new insurer would consider these pre-existing conditions.
If you have a life insurance policy, note that you might also have to pay an early termination penalty.
And investment-linked life insurance policy holders will need to do the math to figure out if they'll be losing money by cancelling the policy. Also note that you will need to start from scratch with a new policy, which means you'll have to wait a lot longer to see your returns.
WHAT TO ASK YOUR AGENT
You might not fully trust your agent, but that doesn't mean you can't still ask him as many questions as it takes to help you make the right decisions for yourself.
Here are three questions you should ask your agent:
- How much commission are you earning on this product? The more commission your agent earns, the more likely he is to push a product, so pay attention to which products are more valuable in terms of commission.
- How much will I lose if I cancel my previous policy? Your agent is sure to tell you how much you'll benefit by changing plans, but make sure you know how much you will lose by cancelling the previous one. In the case of medical insurance policies, you also want to ask if any illnesses arising after you bought the policy could disadvantage you.
- What management fees do I have to pay and how will this have an impact on my returns? If you are buying an investment-linked plan, your agent will obviously tell you that your returns will be great, but without considering all the fund management fees that will be (sometimes silently) deducted.
Do you have any tips for dealing with insurance agents? Share them with us in the comments!