Saturday, April 15, 2017

Don't Fall For This Insurance Agent "Trick"

Don't mind the title, just trying to use the click-bait sort of titles to pull in the views, because this is a trick that most, if not all, of the slimy agents out there will use.

The TL;DR is at the bottom, so jump there if you don't want to see my amazing story telling skills.

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I am just minding my own business walking around when I am suddenly approached by this cute girl.

Quite tall, slim build, nice tan and quite cute. Why got cute girl come talk to me? I spot the lanyard "ABCXYZ Insurance".

Chey. Insurance agent. No wonder. The more cute they are, the more careful you must be, I remind myself.

I insist that I am a damn hard sell and there is a very low chance that she can sell me anything. She persists. Just listen only, no need to commit. I shrug.

Her opener is not bad. She ambiguously described this product until it sounded damn good. She asks for 2 minutes of my time. I was actually early for my next appointment, so okay what the heck. Let's see what sort of "product" this is. See guys, I suffer and tahan insurance agents so that you all don't have to waste your time. (It TOTALLY has nothing to do with her being cute)

Okay, I sit down at the table. Aiyo why all the other tables empty? Why only got me? I'm the only stupid fella that kena tricked into the lion's den?

Suddenly the agent appears from my left. Eh wait, she looks different?! More mature looking (but still young), shorter hair and even more tan, but I can easily tell that she is also still the kind that must be careful. Senior insurance agents got more experience "dok" people. This one must be careful. I cannot let my guard down.

What happened to the agent that talked to me? Don't tell me that this is a bait and switch... not that I really mind since this agent also seems quite pleasant, if you know what I mean... plus since I'm just killing time...

Then the original agent popped up from my right. Walao, what is this? Double team? 2 insurance agents vs 1 GMGH? Unfair matchup! Nevermind, GMGH is strong, GMGH will listen. I have defeated insurance agents before, I can do it again if I have to!

Anyway, from here on I will refer to them as Senior and Junior.

Junior introduces me to Senior. Both have English names. Should be easy to remember.

Senior quizes me on bank deposit rate. 0.05%, nailed it.
Senior quizes me on my bank interest rate. 1.85%, nailed it. (OCBC 360)
Senior says OCBC 360 interest is only up to $60,000. I correct her that it is $70,000.
Senior then talks about the product features and the different product options.
I have already forgotten both their names, dammit.

Junior just sits beside me and keeps nodding her head. I worried it might fall off.
Senior says that "with bank interest rates so low and inflation rate being 2.6%..."

GMGH almost triggered.
GMGH clears throat and Senior stops talking. "Erm, inflation rate is NOT 2.6%?"

Senior looks confused. Junior jumps in for the save. "Yes, inflation rate is 2.6%!"

GMGH GETS *TRIGGERED*


GMGH looks at them blankly. Then replies firmly, "Er. No. Inflation rate is definitely NOT 2.6%."

This goes on back and forth for a bit. I can tell it is going nowhere.

"Inflation rate is not 2.6%. It is 0.7%. You guys are both wrong. Inflation has been negative for the longest time. Inflation at 2.6% is an impossible number. Where do you get your 2.6% number from?"

Both are a bit stunned. Junior volunteers to fact check. Senior continues to explain to me the product. She is doing a pretty bad job.

In case anyone was curious, it was a regular savings endowment plan, participating plan, no guaranteed returns, only capital guaranteed. Just more complicated than usual with its withdrawal features.

Senior confirms all these facts. Senior continues to explain how I can make withdrawals from my plan if I need to... go on a holiday with my girlfriend. Geez. That was the example she used! I'm not sure what kind of financial lifestyle she is advocating... but it is definitely not the prudent lifestyle. I can see how dumb millennials would fall for that though. Anyway, the number which she kept using over and over again might as well be pulled out from her butt since it isn't guaranteed

Junior finally reports back. It must have been tough to type "Singapore Inflation Rate" into Google. Apparently we are both correct.

"Both correct?", I choke, half in disbelief, half in confusion.

Historical inflation rate is 2.6%. Latest yoy inflation rate is 0.7%.

Oh. So we are both correct? LOL. Is she freaking kidding me? Deep down inside, unless they are both super goondu and don't really understand what inflation is, I think that they both know that only one of us was right.

(Hint: It was me)

They change topic. What is my profession? How come I know so much about inflation rates and financial products?

Part of me is secretly happy that they find me a challenge. Part of me is also sad knowing how many people would not be able to defend themselves from such an attack. Let alone an attack by 2 cute female agents. Jialat. This floor underneath where I'm sitting at must have a lot of spilled blood from all the previous guys that sat here before me and kena "dok" by them.

Anyway, they tried their best but they could not succeed. I could tell they were a bit disappointed. They did just spend waste 15 minutes trying to sell me an endowment plan.

Damn. 15 minutes already? Basket, I thought only 2 minutes! Kena scammed already, haha.

I thanked them for their time and I showed myself out while they both just sat in their seats trying to figure out what just happened. They literally just sat there and stared at each other.


I'll tell you what just happened.


I wonder if they honestly did not know the current inflation rate, or if they were just acting like they did not know. Oh well, we will never know.

I check my watch. Just on time for my appointment. It's going to be a good day.

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TL;DR - Insurance agent gave FALSE information that the inflation rate in Singapore is 2.6%. That figure is actually the average inflation rate since independence. The actual inflation rate (CPI-All Items) is 0.7%. Historical average inflation rate is NOT an useful figure to decide if you should buy an endowment plan. The historical average is being presented as if it is the current situation.

Why is this a problem? By giving such a big (and false) number, especially when compared to the current low bank rates / fixed deposit rates that most of us are familiar with, it scares and shocks people to quickly take action because the difference seems so huge. However, they would be taking action based on false information.

Is this ethical? I think not. But then again I think close to no one gives a shit.

Are they "wrong"? Oops, they forgot to say "average". You're the one signing the piece of paper to sign away thousands of dollars every year. Whether it is a good policy or a stupid policy, it is up to you to decide since it can potentially become YOUR policy. You better understand what you get yourself into, or you're going to end up literally paying for your mistake.

Source: Average Inflation Rate in Singapore since 1962 tracked by Trading Economics
Source: Feb 2017 y-o-y Inflation Rate published by MAS
Fun fact: The CPI-All Items was negative for almost the 2 years.

I prefer using the CPI-All Items because.... it tracks all items? Be my guest to use MAS Core Inflation if that suits you.

Recommended reading to level up:
Should I "support" my insurance agent friends?
Should I buy an Investment Savings Plan?
If something is 10% insurance and 90% investment, why do people call it Insurance?

16 comments:

  1. MAS also tracks CPI for the bottom 20%, middle 60%, and top 20%. They will announce whenever it comes time to make the grand announcement, and is reported in the news. However I can't seem to find this breakdown in SingStats --- only the average CPI.

    It's interesting becoz for the longest time (definitely >10yrs, maybe 25? yrs liao), the trend for the bottom 20% has always been for higher CPI increase than the top 20%. I.e. poor people face higher inflation compared to rich folks. Quite easily explained if you look at the trends between socio-economic groups over the years in terms of wages, transport, housing, food, clothing, manufactured goods. Globalisation is REALLY good if you belong to the higher levels of socio-economic classes.

    And it's not just S'pore. Most developed cities around the world have similar phenomenon, even in so-called more socially equitable countries like in Scandinavia. This is 1 of the big reasons for Trump & Brexit.

    But for all this dismal reality, I still believe the best things people can do to help themselves is to adopt a thrifty lifestyle, seek simple pleasures, delay gratification, invest in good education both formal & informal if not in yourself then at least your children, learn how to invest properly, at least to use low-cost broad index funds or ETFs, buy the right types of low-cost insurance that will provide ACTUAL INSURANCE to your dependents if you die or TPD.

    ReplyDelete
    Replies
    1. Amen to proper low-cost insurance and a prudent lifestyle.

      I'm not so up to date with statistics these days, but I'm sure most things are better if you're in the higher socio-economic classes, haha.

      Delete
    2. By the way, the CPI for different household groups can be found here: http://www.singstat.gov.sg/statistics/browse-by-theme/prices
      Latest: http://www.singstat.gov.sg/docs/default-source/default-document-library/news/press_releases/cpi-jul-dec2016.pdf

      Delete
  2. Actually for stress testing our financial plans, it is prudent to use historical inflation figure of 2.6%. The current low inflation may not last too long when interest rates eventually rise

    ReplyDelete
    Replies
    1. Hi Anon,

      I'm all up for using prudent and conservative numbers for stress testing, but what these agents did was to represent historical inflation as current inflation, and compare it to current interest rates.

      Delete
  3. I agree. It is always better to use 2.6% as the inflation rate when we calculate our finance. No matter how low it seems now, it won't last long. It is always better to err on the side of caution.

    The thing about the "newbie" insurance agents is that they are selling what the company dictate so... rather subjective I guess.

    We all need insurance, but I personally echo your previous post about buying what you need. And I think it really make more sense to read up on insurance, see what are available to you and what you really need. I just don't understand why people would fork out thousands per year on a product they can't fully grasp and complain when the fare of public transport increase by 1 cent.

    ReplyDelete
    Replies
    1. Hi Kaiz,

      I support using conservative numbers, but conservative inflation rates should be used to calculate things like mortgage repayments and buying annuities, not as a justification to enter a 10-20 year contract to invest/save in a regular savings endowment plan.

      Using a historical number and presenting it as current is a gross misrepresentation. In which case, endowment plans must have sold like hotcakes when CPI-all items was negative and conversely won't be able to sell at all once current rates are over the historical rates.

      Since we are unable to influence the inflation rate, the best that consumers can do is to ensure that their money is being optimized to give them the best rates of return, taking into account the risk that they have decided to assume and the inflexibility (lock-in) of their investments.

      If someone truly does have a bank account yield 0.05%, his reaction shouldn't be to commit to a decade long policy with multiple terms and conditions to increase his yield. He should instead look towards finding a similar product (cash-alternatives) to maximise his yields, given his constraints (wanting to have cash), or instead decide to re-classify part of his assets to higher yielding investments.

      People probably spend more time thinking which colour iphone they should buy than considering any insurance policy placed in front of them by a pretty agent. Diligence ought to co-relate to how much you're going to spend, right? At least, that is what I feel.

      Delete
  4. Ha! Ha!

    If i am not mistaken, this endowment fund only guranteed your principles return after 5 years? 10 years? 15 years? if i did not read wrongly.

    It is a very dangerous investment to me!

    i remember during my time of investing in NTUC's and UOB's endowment fund, it was stated exactly at the end of the term (longer term got more return), how much you would get.

    ReplyDelete
  5. One thing i hate the most is the non-guaranteed portion. The deviation .... is much more misleading. There should be something like property where every returns are captured in the web and seen by everyone when policy terminates with every transactions.

    ReplyDelete
  6. Hi GMGH,

    Haha, I always enjoy these kind of post from you. I love it because I am like that too, to give sales people a good lesson for not being prepared and trying to just sell sell sell. Is it mean? while some people might think so, but I feel it does more harm to sell the public things that they might regret later on. Anyway, keep this up! I fully support your "cause"!

    ReplyDelete
  7. Enjoyed this post and a hilarious read. =p

    ReplyDelete
  8. This was a great read! I don't usually engage the insurance agents on their product conversations but this is definitely a good way to approach it. Especially the point about the historical inflation rate of 2.6% vs latest yoy inflation rate of 0.7%.

    ReplyDelete
  9. Lol you really tekan those insurance agents...if only they promoting pure term insurance I will sit down and listen :)

    ReplyDelete
  10. They are just going along with their sales pitch. The numbers are from their template its basically just copy and paste to every other person that sits on the table

    ReplyDelete
  11. well explained and very informatie post. thank you for sharing among us

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