Yahoo Finance 5 Questions Insurance Agents Love Asking (And Responses For Them To Go Away)
Exiting from MRT stations have never been more challenging. Most of us can relate to that. We see well-dressed individuals loitering around wearing a lanyard armed with a pen and a clipboard. With a bright wide smile, one of them approaches us while we try to avoid eye contact and widen our stride, hoping to bypass them.
But usually, they will still approach us. And most of the time, these insurance agents will start their conversation by asking us to help them complete a short survey. Sometimes, we are unable to avoid them, especially if we are waiting for a friend.
Here are 5 questions that insurance agents love asking us and our suggested responses for them.
1. “Do You Know What The Inflation Rate Is Currently?”
Purpose Of Question:
Agents want to make use of the question to share about the importance of investing and beating inflation. The words “declining purchasing power” will be thrown around to suggest that if you don’t do anything today such as invest in an Investment-Linked Policy (ILP) that they are selling, the money you save today will become less valuable in the future.
Read Also: The Ugly Truth Of ILPs
Your Response:
“The inflation rate is -0.3% for August 2016 on a year-on-year basis. The inflation rate for Singapore has been decreasing for 22 months straight due to a drop in the cost of housing, utility and transport. Since 1962, the inflation rate in Singapore has been 2.68%.”
2. “Do You Know What Is The Interest Rate Offered By The Banks? Do You Know That There Is A Better Way Of Saving Your Money?”
Purpose Of Question:
Agents want to remind you just how little interest the money you keep in your saving account is earning, compared to the policies that they wish to sell you.
Your Response:
“For normal saving accounts, banks typically offers an interest rate of 0.05%. But that’s your bank. Because I have signed up multipliers programme (quoting programmes like Maybank Save Up Programme, OCBC 360 Account, or POSB Multiplier Programme) which can earn me an interest of up to approximately 2-3% per annum. That is similar to the returns from some long-term savings plan. “
3. “How Much Do You Save Each Month? We Have This Cashback Saving Plans That Is Totally Flexible And Affordable.”
Purpose Of Question:
Agents are trying to suggest some ways you can use your savings for.
Your Response:
(Allow them to draw out the plans, it would usually look something like this): This illustration is based on a male, non-smoker, 30 next birthday with basic sum assured of $30,000. This plan assumes that the cashback is not reinvested into the plan.
Policy Term | Premium Term | Monthly Premium | Total Annual Cashback Received Before Maturity | Guaranteed Return | Non-Guaranteed Return | Total Return |
18 years | 18 years | $276.40 | $24,000 | $12,000 | $26,277 | $62,277 |
Total premium paid = $59,702.40
Difference between total return and premium paid = $2,574.60
Yield = 4.3%
The 4.3% yield is based on the total return received at the end of maturity. This includes the non-guaranteed return portion, which was forecasted at an investment rate of return of 4.75%. This means that any actual rate which falls below 4.75% will further lower your yield of 4.3%.
If this saving plan is meant for retirement, you might be better off contributing this amount into your CPF special account or retirement account of a guaranteed 4%. If you are looking for flexibility, monthly STI ETF savings plan could also be a better option.
4. “You Can Never Have Too Much Insurance”
Purpose Of Question:
Agent realised another agent have already sold you the plans that he was hoping to sell.
Your Response:
“Wrong. One might run a risk of being over-insured. Imagine buying a $200,000 car and insure the car for $3million, we will also run the risk of being over-insured when the amount insured is significantly larger than our income. “
5. “You Didn’t Hear What I Want To Say, What Makes You Think You Don’t Need The Product”
Purpose Of Question:
Agent is basically trying to sell you a product, even after realising you don’t really need it.
Your Response:
“If I really need a product, I will find out the features and buy it after researching. I will not “suddenly” need a product after someone on the street tell me that I need it.”
Conclusion
We are not saying that you should not listen to financial planners. Unfortunately, however, there are too many insurance agents out there on the streets that are simply trying to push products to unsuspecting consumers, even without knowing their client’s needs and financial goals. Some agents themselves may not even be that knowledgeable in the first place.
If an agent is able to give a patient and elaborate explanation on the response you gave, plus more insights that you didn’t realise, then perhaps they do have what it takes to be your insurance agent.
Read Also: Buying The Right Insurance Policy In Singapore
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