Buying insurance? Soon, it will be less painful

SINGAPORE - The reforms sweeping the insurance industry could not be timelier.

In fact, I wished they had been introduced a lot earlier, because it would have saved me years of pain of sieving through insurance and investment products and sitting through endless meetings with agents.

The changes, starting next year, include a centralised website to let consumers easily compare a wide range of life insurance products.

They will get to compare features such as premiums, death benefits and the surrender value for policies such as term life and whole life, those with critical illness riders and endowment plans.

The changes will also allow consumers to buy basic insurance policies directly without having to go through an agent and pay a commission.

Agents' salaries will also be reviewed to consider non-sales targets.

I remember wading into the scary world of investment and insurance many years ago when I had just started my job and was a financial greenhorn.

The plethora of products was intimidating and it took me a period of time to research and digest the related information. What made it doubly difficult was that there was no central resource to go to as the information on products was held by individual companies.

I was guided largely by agents, who were recommended by friends or who lucked out by cold-calling me at vulnerable moments. But I realised after some time that these agents would push only their company's products, and each would invariably explain why their product was superior to another company's. I often left these meetings feeling more confused than ever.

I recalled that I made random decisions. One friend said she bought investment-linked Manulife funds, so I followed suit and invested my Central Provident Fund monies in two of the funds. Less than two years later, I cashed out with a $2,000 loss in the aftermath of the 2008 financial crisis because I needed the money for the down payment on my new home.

Bruised from the episode, I pledged to do more research before I bought any further products.

So for the next few years, I procrastinated on buying anything even though I met many agents in the meantime who advised me that I was inadequately covered.

Getting pregnant with my first child changed everything. Suddenly, I had a deadline for evaluating all the options out there that might offer some coverage for my pregnancy and hospitalisation, and also life insurance for my husband and me.

I had to approach agents from different insurers separately and request quotes. Each company's product also came with a slightly different offering, which complicated the evaluation. For example, some hospitalisation plans covered costs of an organ donor if you required one while some didn't. Some also covered treatment for mental illness while others didn't.

Different policies also offered different riders, such as critical-illness waivers or early-stage critical-illness payouts. My husband and I pored over reams of insurance quotes and brochures and often still felt defeated. It was certainly an arduous process.

It took us a couple of years to finally make all the decisions and get the coverage we wanted. We bought policies from different agents and insurers according to whether their products suited our needs.

From our experience, what helped was consulting an independent agent who is not tied to a specific insurer and so could offer us an overview of all the products in the market. But even in this instance, this agent does not offer the products of an insurer that hired only in-house agents. So at the back of my mind was a nagging suspicion that I wasn't getting a complete overview.

The centralised resource will be a significant help for consumers, especially younger folk who have less experience with the market.

I'm surprised it has taken so long for something like that to be established.

Consumers no longer have to take the agent's word for it and can do their own research and analysis.

I think it will also help to keep agents honest about the pros and cons of their policies.

I hope it will clearly explain the different features of policies offered and key selling points so consumers can judge for themselves.

Perhaps policies should be further standardised.

Currently, some policies make it mandatory for customers to take up riders, while others don't, and some have different calculations for how they calculate the insured's age ("age next birthday" versus "age nearest birthday"). All this makes it difficult for consumers to compare like for like.

Insurers should also be made to explain their policies as simply as possible without jargon and provide a detailed breakdown of premiums - which currently I feel is obscured by different permutations of riders.

It's also heartening to hear that we will be allowed to buy insurance products directly, without having to go through agents, for a nominal fee.

It'll be interesting to see how this affects insurance agents. I still feel there is a role for them, as consumers will still need advice and have people service their accounts. But, no doubt, the pressure of customers being able to buy policies directly will force agents to step up their game.

Maybe some day in the future, insurance agents will be regulated like property agents under one centralised agency, and they will have to offer all available products in the market.

In this way, they will be forced to have a complete understanding of all the products in the market and have less incentive to push a particular product. They do so now because it's the only product they can sell, not necessarily because it's the best one for you.

Ultimately, these moves to boost transparency, spur competition and curb hard-selling are good for consumers.

In a year or so, any young working adult who has to go through the same process I did in evaluating medical and life insurance and investment plans will find it a lot less painful than I did.

stinvest@sph.com.sg

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