Thursday, April 09, 2009

Fashion whims in insurance

Did you realise that financial/insurance products suffer from fashion whims too?

During the good old bull times, we have products offered by companies touting good returns projected way into the future (I heard from a friend, the returns projected are at 10% or more). It's no surprise then that the returns are much less than projected - it's just not sustainable. So what's fashionable now?

If you ever had people cold-calling you regarding their newest product, or if you've ever been waylaid by people on your way to a shopping mall, you'll have realised that the latest fashion whim in financial products are endowment polices. These are called a variety of names but all of them fulfill the same function - save a certain amount of money per month for a period of years mixed in with a bit of insurance coverage, essentially a sort of savings plan.

Hey, don't get me wrong. I'm not saying that endowment plans are rubbish - they are not. I'm just saying that they are not suitable for everyone, especially those who have no proper life plans, CI (critical illness) and H&S (hospitalisation plans). You know, when you have only one product to sell, everyone seems to need the product you are selling. Just like when you have a hammer in your hands, every problem seems like a nail to you.

I noticed that banks are getting a bit more aggressive towards selling insurance policies to its customers. They are touting H&S plans and other insurance plans too. For those who are unsuspecting and who bought it, may I ask a few questions to you:

1. Who is going to service you when you have claims?

2. If you have queries, who are you going to call for help?

3. Who's going to do a yearly review with you since you last bought it as your circumstances must have changed?

Not sure about you, but I prefer to have some face whom I can talk to and hold accountable for. Of course, that person might run road too, but there'll always be another one to take over your case.

Another fashionable whims in insurance I detected recently is this early payout upon diagnosis of CI. Suddenly the brochures are highlighting this clause, and there are new products introduced with the selling point as this. Hey, you know what, the whole industry is filled with incompetent people inculcating the incomprehensible into the's going to be an immeasurable effort.

If you ask this layperson who knows nuts about insurance, I'll say go for the big picture. If you're my age, single but not available and with no child, you'll want to ensure that you have at least a proper life coverage for CI and death, together with the all important H&S plans. Cover these basic needs first, then we talk about other add on like personal accident plan, hospital benefit and disability income. Settle that insurance part, then we proceed on to talk about investments. Exactly in that order.


PanzerGrenadier said...


Couldn't agree with you more.

Just like fund-managers have the mutual funds/unit trusts of the month/year/decade, most financial products are repackaged to capitalise on the key issues people are thinking about.

I don't know about you but DBS's CEO's passing has made me think about my mortality (again!)

Be well and prosper.

la papillion said...

Hi PG,

It did remind me of my own mortality too. I was browsing through NTUC's claims for the month, and was a little frightened by the stats. Most of the cancer death payout are around 30-50 yrs old.

We're in the risky age now.

Really, BE WELL then can prosper!