Wednesday, July 11, 2018

Inconvenient Insurance Pills to Swallow

1) No one in Singapore needs whole life insurance

2) Most insurance agents will immediately pitch you a whole-life insurance or an ILP (which you should not take). You should not continue dealing with them.

3) Most agents have extremely poor knowledge in financial planning and investing. Some don't even know the inflation rate and gives you bullshit numbers.

4) If you are lazy to settle your own insurance, you will pay an arm and leg for an agent to recommend an expensive product for you. Nothing wrong with that, if you're lazy.

5) If you are lazy to settle your own investments, you will pay an arm and leg for an agent to funnel it through an ILP to get subpar returns for you. Nothing wrong with that, if you're lazy.

6) Don't buy endowment plans.


8) If you need to buy insurance from anyone, DO NOT ASK YOUR INSURANCE AGENT "FRIENDS". Ask a non-commissioned agent for advice or better yet, a friend who is an insurance actuary.

9) You MUST have a shield plan (H&S)

10) Get term life insurance

11) If you need more term life coverage later on, layer it up

12) If you have a family history of critical illness, add CI coverage in

13) If you have a terrible family history of critical illness, get early CI coverage and go for regular screenings

14) If you have a blue collar job, get personal accident insurance and consider unemployment insurance

15) If you don't know anything, fricking google it.


I recently had a debate with a friend about the insurance industry in Singapore, and that got me to make this post.

I really hate the insurance industry in Singapore. It's predatory *because of the screwed up incentive structure of products and agent commissions* and most consumers end up getting screwed.

Don't get screwed.

If you're an agent, try not to screw people, unless you really don't like them.

That is all. Dismissed.


  1. Don't hate the insurance industry --- the govt allows it & even encourages it (esp in the early days).

    For PA cover --- can consider even if "white collar" as long as your job requires motor skills e.g. surgeon (you still need hands & fingers when using Da Vinci robotic surgery). Even Ironman needs to move his hands & mouth/tongue i.e. talk, to operate his billion-dollar suits.

    1. Hi Anon,

      You are right.

      I kept my statement short to maximize impact but PA and unemployment insurance are very job-specific and hence very individual-specific.

      I would go one step further to say that it would also depend on what other non-physically intensive job skills one possess, as a plan B - either as a permanent alternative, or an interim job during recovery and rehabilitation.

  2. Yes. Please do not hate the industry because of a few black sheep or some black sheep i would say.

    For one, i would never pitch anything if i don't know my clients needs and priorities.

    Secondly, i would ALWAYS ask them to break down their spending and expenditure before we proceed further to find out his spending habits as well as the ability to fully utilize the extra surplus.

    I would even advocate having some surplus in the bank for raing days before recommending any new products.

    Even after recommending, i would still run it through with them to make sure this is what they want and provide cheaper alternatives like term plans like you mentioned.

    Yes, black sheep clout the industry. But there are still some that benefitted from proper financial planning and is genuienely wanting to help others do the same.

    1. Hi Unknown,

      You are right, I am generalizing, which is bad of me.

      To be fair and honest about it, I have actually met a handful of good agents that I would be glad to recommend to family and friends - and I have.

      But alas, the bad sheep outnumber the good guys by a staggering number.

      Kudos to you. I really do believe that there are segments of people that will really benefit a lot by getting proper advice from a good agent. And I will concede that for some people, they really are actually better off with an ILP if they are completely incapable or lazy to do anything more on their own. In such cases, an expensive plan is better than no plan at all.

  3. Everyone is entitled to their own views, and have their rights to hate any industry they dislike.

    On the same topic, I will like for you to suggest the following too:

    1) No one needs medical screening nor doctor visits, unless you like doctors screwing you with exorbitant medications and unnecessary tests. Panadol is sufficient for almost all ailments

    2) No one needs to go to restaurants or eateries, unless you like chefs and F&B firms screwing you with big profit margins. Learn to cook. Even better, Maggie noodles will suffice on a daily basis.

    3) Don't buy from large corporations unless you like them screwing you with (Surprise!) big profit margins. That iPhone you just bought earned Apple a handsome 1,000x profit and most likely financed that big house Tim Cook just bought.

    Don't get screwed.

    1. Hi Anon,

      You are right, everyone is entitled to their own views.

      I can sense the point that you are trying to drive home.

      1) If someone doesn't want to pay extra for specialized treatment, then they can only get the generic treatment, right?

      2) If someone doesn't want to do something, they shouldn't complain if they have to pay for it, right?

      3) If someone doesn't want to get screwed in a deal, then shouldn't buy any product or service which gives the seller a profit, right?

      You know what? I agree.

      But, to an extent. And I disagree on 2 points.

      1st point - the broken and massive incentive / bonus structure that pretty much forces every financial situation by every client to be solved with an ILP or whole life insurance.

      2nd point - the lack of AWARENESS given to the consumer that (1) the agent receives massive commissions / bonuses and (2) there are other products with similar coverage and lower premiums.

    2. 1) You visit the doctor because you suspect you have dengue. The doctor prescribes you Panadol without conducting any examination or have a consultation. The Panadol costs $50 a box.

      2) You go alone to an Italian restaurant to eat a $15 pasta. The waiter recommends the house special that is perfect for you - you end up being served a soup, a pasta, a meat platter, a pizza and 2 bottle of wine, 1 red, 1 white. Oh and a tiramisu. The bill is $800.

      3) You need a simple phone just to make phone calls. You get sold a iPhone X. Costs $5000.

      Don't get screwed anon.

  4. Screwed up consumer products like iPhones, expensive restaurants, overpriced private specialists are usually one-off expense (and ppl usually use private shield plans for the private specialists).

    However high expense ratio par products like whole life & endowment are long term blood suckers with very low risk-adjusted returns & very low coverage. The only way to break them is to absorb an even higher penalty for early termination.

    Know that commission rates are higher for par products & ILPs, both in terms of percentage as well as quantum. This is becoz such products are more profitable & hence companies try to motivate their staff to push these products.

    You also need to know that many companies push their staff to meet minimum quota of par products & ILPs, failing which they will be terminated for poor performance after 2-3 months. It's their KPI. It doesn't matter how many term plans & shield plans they manage to sell. Therefore they are really motivated to screw you before they themselves are screwed.

    1. Hi Anon,

      Thanks for your comment.

      It seems like you used to be in the industry, or know someone close from the industry.

      Few people are aware that pushing term policies are opposite to the goals of the agent's team leader and company, even if it is the most suitable product for a large number of people.

      For the agents that understand that, many are naturally pushed out of the industry if they don't have enough "victims" subsidizing their stay. No one can work for free, I don't blame them at all.

      The dirty system perpetuates itself, while the good is suffocated.

  5. I did ask my own agent for proof of comm.
    Based on my budget, whether I choose a whole life, ILP or term plan, her comm is around 40% to 50% (which means regardless of what I choose, she still earns the same amount).
    Personally I don't like the idea of term and will like to leave a legacy amount for my children. But to each his/her own.

    1. She will only earn the same amount if the premiums are all the same for whole life, term & ILP. Doubt if this is the case.

      For average family with 2 kids & maybe elderly parents, will need at least $1M to provide support for 20-25 years. That's $40K-$50K yearly expenses. In real life, will be "less" due to inflation as the years progress.

      Average person cannot afford $1M whole life. Even for a multi-millionaire who can (barely) afford the $1M whole life premiums, he will of course say that $1M is insufficient for his liabilities & dependents.

      Therefore wholelife fails as sufficient protection.

      If you want savings & legacy, at least endowment is better than wholelife. But you need to select long term --- at least 25 to 30 years. And minimize the insurance coverage to reduce cost. Add a premium waiver if you KS.

      Endowment is still a really shitty way to "save" long term money for legacy. Your return after 30 years only 3+% annualized. Might as well put into your children's CPF-SA to earn 4%-5% for them.

    2. 1st Anon,

      I strongly doubt that her commission would be the same. Like 99.99% doubt.

      And as 2nd Anon has said, whole life is quite a terrible product for providing protection.

      Buy Term, Invest the rest would be very suitable in your case.
      1) Your burden from insurance premiums would be drastically lower
      2) You have freedom to select what kind of investments / savings to put the remainder of the money into, to leave that legacy amount to your children
      3) You have the freedom to stop, pause, reduce or increase the investment / savings portion at anytime, and for any reason
      4) You have the freedom to decide to actually spend your "legacy amount", instead of having it locked away from you.

      As mentioned, children's CPF-SA gives great returns. Your own CPF topup is another very easy candidate for zero-risk, decent returns.

      If you are lost for investment ideas. You can refer to where funds are channel to in a whole life insurance or ILP, but do it yourself and end up paying drastically lower expense ratios, and of course, retain the full flexibility and financial freedom over that portion of your funds.

    3. Hi,

      Yes, agree with GMGH. The commission earned will not be the same for the the different products. What the agent was telling you was likely the First Year Commission, which most of them will earn only at most 55% (can't recall the exact figure) for the first year, after which the payout will vary according to the type of plan.

  6. wahaha, i dont need insurance, my God said I live to hundred and twenty.

    1. True if you don't have dependents, then you don't need life insurance. Even MAS will agree.

    2. Live to 120 only need to worry about running out of money then, any of your dependents you had earlier in life are probably not dependent on you anymore lol.

  7. With regard to insurance commissions, the total amount is collected over a number of years. So while the 1st year comm PERCENTAGE may be similar for term & par products, the total payout structure is higher for par products.

    E.g. For wholelife & endowment:
    1st year - 50% of annual premium
    2nd year - 40%
    3rd year- 30%
    4th year - 20%
    5th year - 10%
    6th year onwards - no more.

    E.g. For term:
    1st year - 55%
    2nd year - 35%
    3rd year - 15%
    4th year - no more.

    E.g. ILPs can have some crazy commission rates:
    1st year - 100% or 120% of annual contributions.
    2nd year - 70%
    3rd year - 40%
    4th year - no more.

    MOREOVER if you're in the insurance biz, your KPI is based on API (annualized premium indicator) which is calculated as a weighted percentage of annual premiums.

    The kicker is that for all insurance companies I know, the weighted percentage for par products & ILPs is MUCH HIGHER than for term plans or shield plans.

    So by selling term plans, not only you get a smaller commission in terms of actual dollar amounts, but the percentage used to calculate your API is also smaller.

    A double whammy and a quick way to get yourself screwed by your team leader, sales managers & general manager ... and a fast kick out the door. The team leader will also get screwed by the General Manager ... and if you did NS you know how things work when your platoon commander gets screwed by the battalion CO.

    Insurance products are SOLD on COST not on needs.

    An advisor will do her goddamn best to push you a $100K wholelife+CI or ILP+riders instead of a $1M term, if $2000 is all you can afford.

    He/she will tell you don't worry, any shortfall in cover to be reviewed next year in followup review. Customer has funding constraints. Prefer products with savings and/or surrender value. And it will be documented as such for any audit by MAS.

    1. Wow Anon I am suspecting that you are / were an agent or are close friends with one!

      The numbers regarding the comms looks rather close to what I recall seeing in the past

      I wish these numbers would be more open, transparent and accessible by the public.

      Thanks for the info and comments!

  8. Don't be stupid, try asking people to buy a term plan with no cash value, see how many people out there would want it as compared to a plan that covers you and at the same time you can take back money.

    1. Sorry sir I am stupid. Your comment has taught me the way and I have changed my mind. Thank you so much.

    2. What a retarded comment from 1st Anon. Whole life insurance is like $1200 a year for 100k coverage. Term life is only $90 a year for the same coverage. Speaking from my experience.

      Who needs cash value when I get to have very liquid 1k worth of savings in my bank account? The savings in my bank account is the REAL cash value, not stuck in some paltry returns savings plan. pffftt


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