Many families in S'pore have no life insurance: HSBC study
27 October 2011 1844 hrs (SST)
SINGAPORE: Many families in Singapore, including those with children, have not recognised the risks of not having life insurance protection, according to a global study on retirement and financial planning by HSBC.
More than half of the parents surveyed do not have individual term life insurance, despite having dependent children.
Among those who do have financial plans for their families, a quarter of them do not have any type of life insurance included in their plans.
Eight in 10 parents have not made a will.
"We are seeing a major protection gap where many Singapore families, especially those with dependent children, are failing to recognise the benefits of life insurance protection," said Mr Walter de Oude, CEO of HSBC Insurance in Singapore.
"Life insurance is widely available in the Singapore market and in different forms tailored to individual needs at various life stages. It is a fundamental form of protection which is essential for all families," he added.
Nearly half of respondents aged 30-39 said they have no short-term savings.
And only 30 per cent of those married or living together, aged 40-49, are protecting their assets.
Of those aged 50-59, 34 per cent do not have retirement plans while only 12 per cent are undertaking tax planning.
When it comes to gender differences in exercising financial decision-making, the survey also found that Singaporean men are more proactive than women in making financial decisions in the household, concerning both retirement planning and household budgeting.
The findings emerged from HSBC's 'The Future of Retirement' programme, an independent study into global retirement trends.
The study surveyed more than 17,000 people in 17 countries, with 1,000 participants from Singapore.
I would like to recommend a life insurance product which I have been a client of for several years already. I am not paid for advertising.
My favorite life insurance plan in Singapore for family protection in the event that I can no longer serve as a breadwinner for the family is the SAF Group Insurance for NSmen from Aviva. I am a policy-holder for several years already.
It is the best deal in Singapore that I know of that fits my criteria. It offers the best value for money per dollar for protection. For an annual premium of about SGD920, you are covered up to SGD600k. The coverage extends to high-risk activities like military training which I do not think is covered by other insurance policies.
There is an advance payment of 50% (limited to SGD100k) if the insured is diagnosed with a terminal illness. There is even a daily hospital cash benefit which pays up to SGD10 for every SGD50k assured. One thing I like about this policy is the partial cash rebate of the annual premium during good years. I know of no other policies that have a similar feature.
For parents with sons who are going for National Service soon, it is a policy worth considering. To my knowledge, it is the only policy that covers mishaps during National Service.
For more details, please visit http://www.aviva.com.sg/pdf/57660_SAF_Brochure.pdf and read the footnotes and the clauses yourselves. My brief summary cannot cover all the restrictive clauses that all buyers should be aware before buying.
If you know of a better deal, please post on this forum. I am confident none such exist.
Please note that there is no savings or investment component in this insurance plan. In other words, you do not get back any money at the end of the day. This is why it is so much cheaper than the endowment, whole-life or investment-linked policies that insurance agents like to sell. It is a pure protection plan which is almost never recommended by insurance agents because it pays very little commission. So, if you want to buy this policy, do the agents a favor. Don't expect them to visit your home for this policy. If they do, it is reasonable that you will have to put up with sales talk for the higher commission products like the endowment, whole-life or investment-linked policies which you may not have interest to buy in the first place. Submit the application form yourself.
As a general rule, I never liked insurance products that mix investment or income. If I want income, I will go for fixed-income products like government bonds or fixed deposits. Insurance plans that offer income come with projected returns which cannot be relied upon. Ignorant customers can be easily taken in by the aggressive projected returns to lure them into buying. It is easier to analyze fixed-income products with guaranteed returns than insurance plans with projected returns. The insurer actually has an incentive to use unrealistic projected returns to boost sales. Consumers should be aware of this risk.
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Trust yourself only with your money
My baby is expecting to deliver next month, apart from comprehensive H&S coverage, what should I get for him? I don't really believe in endowments plans and would like to hear your views , and can someone share information on raising a kid? I saw there were a few discussions on it on earlier pages but had mainly shifted to insurance topics Later..
cheers
(25-12-2011, 11:44 PM)guru1237 Wrote: My baby is expecting to deliver next month, apart from comprehensive H&S coverage, what should I get for him? I don't really believe in endowments plans and would like to hear your views , and can someone share information on raising a kid? I saw there were a few discussions on it on earlier pages but had mainly shifted to insurance topics Later..
cheers
Time to start buying those baby and parenting mags! I myself started buying selected issues when my girl was born, more than 2 years ago. Some of the good ones are Mother & Baby, and Young Parents. There are a lot of tips about bringing up baby, products to buy, budgeting, health, and even insurance and financial planning etc.
If you stay in the new estate e.g jurong west, sengkang, pungol etc.. And have the intention of putting yr child in child care center, I suggest you start looking for one. My boy was on wait list for 2 bloody years before he manage to get into one this year. Our govt infrastructure planning really sucks big time.
Hey all thanks for the tips, yeah we bought some of those mags but not on a regular basis, think i will actively and selecting check those mags out! We even attended some baby seminars, but reading on the Earlier posts on cost of raising a child is pretty scary ha. Coz nobody really tells u how much does it cost to raise a child over 20 years..
Presently I live in Hougang with my parents, still waiting for my chance to get the damn Hdb ...will be considering to use a nanny if we can find a suitable one..
(25-12-2011, 11:44 PM)guru1237 Wrote: My baby is expecting to deliver next month, apart from comprehensive H&S coverage, what should I get for him? I don't really believe in endowments plans and would like to hear your views , and can someone share information on raising a kid? I saw there were a few discussions on it on earlier pages but had mainly shifted to insurance topics Later..
cheers
Probably you will need to buy for yourself taking into account of the new family member instead. So that in the unfortunate event of passing away or loss of ability to hold a job, your family will not fall into deep poverty.
That was my first thought when i knew i am going To be a parent..in fact last month, I upgraded my H&S policy, got myself a disabilitity income plan and accidental policy as well..I am pretty much covered for CI, TPD and death..
The truth is out! Now you know why many FA do not like a client to "Buy Term, Invest the Rest"; and be careful of how some rogue agents try to sell you 25-year Endowment plans in order to garner higher commissions.
d.o.g. did mention commissions for agents were much, much higher for Whole Life policies, but this attachment really takes the cake!
Comments?
The Straits Times
Mar 28, 2012 Beware profit-driven insurance agents To get higher commission, some push policies that are unsuitable for clients
By Robin Chan
COMMISSION earned on a whole life policy can be several times larger than that earned for a term policy - creating a huge incentive for agents to sell certain products even if they are not suitable for the customer.
The warning came from some industry players yesterday, who told The Straits Times that the sums do not even include overrides on this commission.
Overrides are fees taken from commissions that are paid to an agent's supervisor and that supervisor's manager, and could add up to as much as 160 per cent of the annual premium.
Mr Stanley Ng, senior financial services manager at Axa Life Insurance, said: 'Certain products do drive the behaviour of some of the insurance agents on what they want to sell. It does drive some insurance companies too.
'That is why they like to sell participating products (such as a whole life policy), as they are the most profitable ones for most insurance companies.'
Said one junior insurance agent: 'Term policies don't make the company money, so we have to sell other policies like investment-linked plans or whole life policies.
'I only talk about a term policy if the client asks me specifically about it.'
These distribution and management expenses will be examined in a Monetary Authority of Singapore (MAS) review of the life insurance and financial advisory industries.
The review, announced on Monday, could lead to commission being restructured or even eliminated.
MAS managing director Ravi Menon said that the Financial Advisory Industry Review will look at whether the commission-based structure aligns the interests of financial advisers with those of the customers, or whether agents have the 'adverse incentive to sell products that pay them higher commission'.
Australia and Britain have eliminated the tier structure and are considering banning commission completely in favour of a fee-based model, whereby customers pay a fixed amount for the financial advice they receive.
By July next year, commission will be banned in Britain and financial advisers will set their own charges based upon a price list shown upfront.
Mr Christopher Tan, chief executive of financial advisory firm Providend, said a fee-based approach is much more transparent and can in some cases save the customer money compared to a commission-based model.
His firm charges a flat fee of $3,000 to provide pure insurance advice. If the customer then buys a policy at an annual premium of $5,000, the commission earned on that - which could be a further $5,000 - stays with the customer.
Under a commission-based structure, the customer would pay an annual premium of $5,000 for the policy with a further $5,000 going to pay the agent's commission - so he would be worse off.
The change in pay structure could reduce the number of agents while raising the professionalism and quality of the advice provided. There are about 13,200 agents here, according to the Life Insurance Association (LIA) - the same number as 20 years ago.
Agents in Britain and Australia have mostly moved on to become financial advisers, earning a fee for the advice they provide, said some observers.
Dr Khoo Kah Siang, general manager for Singapore at Great Eastern Holdings, said the firm has been collating feedback from its agents.
'It is important that we have an industry that is able to attract people. The question is, what is the best structure?' he said.
'Perhaps there could be some tweaks to the tiered structure, and working together with the regulators, maybe we can help to come up with a structure that is workable both for the industry and the consumer.'
NTUC Income has eliminated tiers. Only sales agents get a commission, while their managers are paid a salary.
Mr Ken Ng, senior vice-president and general manager for life insurance at NTUC Income, said: 'NTUC Income has the lowest commission rates in the industry, primarily because we do not have a multi-tier distribution structure.'
LIA president Tan Hak Leh said it was too early to analyse the impact on the workforce as the review panel has not yet been convened.
'The announcement is one towards raising the competency and overall effectiveness and efficiency of the industry. Clearly, if the review can shift the industry to the desired outcome, it will be for the better of the industry.'
chanckr@sph.com.sg
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The Straits Times
Mar 28, 2012 Stunned customers demand transparency
By Magdalen Ng
SOME customers have demanded more transparency in the remuneration structure for insurance agents, after learning just how much some agents earn from the policies they sell.
Teacher Justin Lee, 26, told The Straits Times yesterday: 'I was stunned. I knew they got a commission, but I never thought it was so high.
'In the past, I bought policies mostly based on whether they met my needs, but now I am going to think twice.'
Mr Lee, who learnt about the high commission fees when he researched online, welcomes the review of the multi-tier distribution structure.
This is where agents and their bosses get commission derived from annual premiums paid by customers.
Mr Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), called for more transparency, noting on Monday that benefit illustrations show the total distribution costs but hide the direct payout to the financial adviser.
An insurance veteran with more than 20 years in the business said including total distribution cost was the result of a 1994 initiative to promote greater transparency.
These 'total distribution costs' also include other costs, such as the money paid to the insurance companies for office rental and support units.
While this was a step in the right direction, it may not be easy for the layman to identify the total distribution costs on his policy as the pages of tables and figures can be confusing.
Mr Leong Sze Hian, former president of the Society of Financial Service Professionals, said: '999 people out of 1,000 won't understand the numbers.
'Maybe policies should just state what the net yield for the company is. If it is 5 per cent, and my net yield is 4 per cent, then my cost will be 1 per cent.'
Even if you were to ask your financial adviser outright, there is no stipulation that he or she has to let you know how much commission is earned.
There used to be a limit on the amount of commission that an insurance agent could draw but this was abolished in 2002.
A review panel set up by the MAS said 'consumers will be informed of the distribution and other costs involved through the new disclosure requirements', which were also recommended.
Instead of a cap, commission fees were left to be determined by market forces. This was a move that aligned Singapore practices with those of other markets, such as Britain, and reflected the liberalisation of the financial advisory landscape.
With Britain and Australia making a move recently towards fee-based payment, the MAS is making a similar shift, to ensure that agents make giving sound financial advice their top priority.
But Mr Farokh Fan, senior marketing executive at Pansing Distribution, said the quantum of the commission does not matter as much as knowing what the costs are.
Mr Fan, 33, said: 'I think it is okay that the agents take a large cut of commission. Everyone needs to make money, but I need to know exactly how much I'm paying.'
I am hoping one day we can buy insurance directly from the insurance companies and bypassing the agents, and the insurance companies should not charged these buyers any commission. This is similar to buying shares DIY online versus through a broker, where one has to pay a higher fees if one choose to use the service of a broker. Of course many agents will not be pleased about this, but hey, many agents are also not worth their salt.
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