Excerpt from The Star, June 25 2009
Thursday June 25, 2009
Extend rebate system to life insurance too
Making a Point - A column by Jagdev Singh Sidhu
MIDDLEMEN used to do a thriving business a long time ago. Filling up forms or getting your way around a government department or agency seems smoother once the services of a runner is employed for a fee.
That concept of agents is well entrenched in many facets of the private sector too. There is an army of agents out there, selling unit trusts to insurance policies. And business has been good.
These services cost a fee, which agents derive income from, and when Bank Negara decided to implement rebates for the purchase of general insurance covers by bypassing those agents, there was an outcry from them.
For motor insurance, those rebates start at 5% of premiums for the first year and extend to 10% per year thereafter.
For a person who is paying thousands of ringgit for insurance coverage, that sum of money represents a tidy saving.
However, this benefit should also be extended to the life insurance business. Years ago, I walked into a large insurance company wanting to buy a policy for my son. I knew what I wanted but was told that I could not buy a policy directly from the company and had to employ the service of an agent.
Knowing fully well that a slice of my premiums would be taken up as agents’ commission, I wondered if there was any other way around it as I felt that an agent should not receive my money for really just submitting my application for insurance coverage.
Whereas that cosy relationship might still be practised by some insurance companies, I was glad to also learn there is a choice out there now for individuals to bypass agents and buy life policies directly from an insurance provider. The number of people seeking direct purchasers should only grow as financial acumen of the public improves.
There should be some sort of savings if people choose to go directly to a company. If there is none, then the company should somehow differentiate such a policy holder from one that pays for the service of an agent.
An insurance company would retain a larger amount in premiums from those who deal directly with them instead of with agents. Hence, the returns or benefits for such policyholders should be higher.
As for the agents, they still have a role to play. Not everyone will want to go directly to buy their own life or general insurance policy and they can still provide a service to customers. But as is the case with a number of other industries, the role of a pure one-product agent might be a sunset industry.
Avenues for skills upgrades are plentiful in today’s market. Financial planners or wealth planners can offer more value-added services to their clients than maybe a pure one-product salesman could.
And by giving an option of a more holistic suite of services, customer retention maybe a little easier to deal with for the new generation middleman.
# Jagdev Singh Sidhu is a deputy news editor in the Star. He is staring at a huge insurance bill to pay by the end of this month.
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Hi brother,
ReplyDeleteI am in the life insurance business for almost thirty years, my clients still need my services and advices. As long as we are still needed, insurance still requires agents. We have to be sincere and committed before they accept us. This is my true fact of life.