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A Must-Read Article Before Buying Any Insurance in Singapore

Some folks may not welcome our article, but we believe it will serve to benefit both Singaporeans and our insurance industry in the long run.

Insurance is good, yet somehow it sounds like a negative word in our society. Unwanted soliciting, misrepresentation of products and plain horror stories such as insurance agents going to old folks HDB estates to sell insurance plans to the elderly only serve to portray the negative image of the industry.

We like to spend some time discussing at length about this widely misunderstood industry. We know insurance is important, and hate it when people simply discount insurance as an optional component of financial planning. It is not. The only thing that irks us more than that is when we hear of stories of people we know buying insurance products with exceedingly high premiums, which they do not need.

So bear with us today. Our article might be longer than the usual, but we assure you it will be relevant and extremely useful, especially if you know nothing about buying insurance in Singapore.

Types of insurance agents:

Generally there are 3 different types of agents in the market.

1. Agents working in an insurance company – We usually call them insurance agents and sometimes, financial planners.

2. Agents working in a bank. – We usually call them personal bankers.

3. Independent Financial Advisers.

Qualifications of agents:

All agents in Singapore need to pass 3 exams before getting their license. They are M5 – “Rules and Regulations for Financial Advisory Services”, M9 – “Life Insurance and Investment-Linked Policies”, and Health Insurance (HI)

M8 – “Collective Investment Schemes”, is not mandatory. It’s applicable for agents or bankers who are selling unit trusts in Singapore.

Other qualifications include Personal General Insurance (PGI), Basic Insurance Concepts and Principles (BCP), and ComGI (Commercial General Insurance). The 3 certs – BCP, PGI and ComGI are necessary for an agent to sell general insurance in Singapore.

What these qualifications mean?  

An agent who has cleared M5, M9, HI, BCP, PGI, ComGI and M8 have access to sell the full suite of products out there in the market.

What this also means is that agents who have not obtained these qualifications are not allowed to give advice on investment funds. These agents are usually advised by their compliance team not to give clients specific advice, unless they’ve cleared the relevant papers to do so.

It also means that an insurance agent, who claims to be well versed in investment, dollar cost averaging, asset allocation, and etc, may not be entirely honest. There are a lot of things to know when it comes to investing. These include items such as Est. P/E, investment style, top holdings breakdown, upside potential, expected volatility. An agent may urge a client to invest into Investment Linked Products (ILP), but few of them actually can explain the real advantages beyond reiterating what they have been taught to say by their companies. Of course, it is entirely possible as well that your insurance agent might actually be one of those good ones who are really well versed in investment related matters.

Things you can do

Asks the agent for his or her license, collect their name card and call the company to check if this person is still working for the insurance company. Ask the company how long the person has been working with the firm. Ask your agent if he or she offers the full suite of products including car, travel, accident plans and fire insurance. Tell your agent to give you the full presentation, and disclosures.

Things to be wary of

If you’re not comfortable with the agent, walk away. If you suspect he or she is lying or hiding things, walk away. There are tons of agents out there, and for every bad egg in the market; there’ll be an honest soul. Learn to differentiate between the two. A good insurance agent can bring you a long way in life while a bad one can easily set you back year in terms of wasted financial planning. It is definitely worth spending time picking one or two good insurance agents that you trust. Ideally, you will want someone who knows about finance. The person may not necessary be an expert in all area, but he or she needs to have your interest at heart. A good salesperson is insuffcient.

Things not to do

DO NOT let your potential agent buy you a drink, or a fancy dinner for that metter. You do not want to feel obligate to buy something that will cost you $2k a year, for the next 30 years, just because you drank the coffee at Starbucks.

DO NOT sign the plan on the second meeting, or be pressured to do so. A conniving salesperson would surely put on the pressure to close a sale by the second meeting. You do not need to give in. Bring back the benefit illustration, read it, think through your cash flow, ask someone you trust, read up more online, ask more questions if you need to. You can still alter the plan by reducing or increasing the commitment amount. Ask for alternatives and do a comparison between a term plan, an ILP and a whole Life policy.

DO NOT chuck the proposal into the dustbin (unless you know for sure already that the agent did a crap job for you) once you reach home. Read through the document. It is not very difficult, and at the end of the day, it’s your money, not the agent.



Royalty-free photo from Getty Images. Used with appreciation.