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The MDRT Experience

>> Tuesday, September 6, 2011

I was amused reading through the comments following an article of a Million Dollar Round Table (MDRT) agent processing a insurance claim of $20k for the death of the breadwinner of a family of 3. The article added that she was even proud to deliver the $20k cheque and boasted about the prompt claim process.

The comments included:
- "$20k where got enough?"
- "If proper Fact Find is done, this would not have happened."
- "Difference in commission results in whole life sold instead of term insurance"
- "Who can achieve MDRT by selling term insurance only?"

Seems third parties hiding behind computer screens gives one the power to judge others actions when they could be doing the same thing.

The amount of $20k being sufficient or not, can only be determined with a proper fact find. Perhaps the family had a huge inheritance or has a source of passive income to sustain their lifestyle and $20k is the client's wish to use it to take care of final expenses or charity only. Either way, using your own frame of reference to judge the appropriateness of the amount is falling into the same trap of not conducting a proper fact find.

Doing a proper fact find would prevent this? I beg to differ. Carrying out a needs analysis is purely academic, calculating a shortfall based on client input. The key issue is still not addressed, advice on the need for proper cash flow management and recommendation for choice of product. Firstly, client's provide the budget which may be insufficient to meet the shortfall, proper education of cash flow management is crucial to balance the amount committed to risk management. Secondly, it is at the sole discretion of the agent to recommend the product, designing a financial road map is more of an art than a science. There is no scale of judgement on the type and quality of product recommended.

Sometimes it is even the client's choice that they would like returns. They are uncomfortable to keep paying with nothing in return, whereas their friends & family get back their premiums at maturity. The mindset of insurance in general is that there are plans that give you back your premiums at the end of the plan, so why go for plans that have nothing in return. Agents may also agree with this concept and purchase such plans themselves. Ethically, both parties are in perfect agreement and the conscience is clear.

I am a believer of term insurance. But the mindset is not something that can be changed over one brief appointment. Some coverage is better than no coverage. If you do not sell me what I want (whole life/ilps), I will buy from someone else who will. Moreover, no one can be against earning more money since such plans pay more commission.

The MDRT is a hallmark of good sales. Normally, performance in sales comes at a compromise of time spent on good financial planning. Further, it is determined by commission earned on new sales, so MDRT is actually an achievement in consistently selling to a lot of new people, a lot of high commission products. Unless the criteria is changed, it is a fact. It would be interesting to know if there are any MDRT agents who sell only term plans or are purely fee-based and can cope with good service to all their new and existing clients.

I hope I am not defending the agent or adding fuel to the fire as I am in no way related to the incident but would like to voice my opinions only.


Azfar September 7, 2011 at 11:25 AM  

Thank you for writing such a balanced post. Indeed, there has been much vehemence over the internet directed at all sorts of things. Balanced, rational voices like yours are hard to come by.

It's rather unfortunate that term insurance isn't given the respect that it should get in Singapore. The problem, I believe, lies in the structuring of products and the financial institution's emphasis on receiving 'deposits' through whole life/ILP premiums. If a mindset change towards prioritizing term insurance and sufficient coverage were to come, it has to start with the principal - ie the insurance company. I'm not an actuary, but I do believe there are ways to incentivize the buying (and selling, on the agent's part)of term insurance and still maintain a healthy profit margin. Perhaps by re-balancing the profit mark-up on term insurance premiums and increasing the share of commissions for the agent, since the business is an agent-driven one. It's a structural issue - agents work and live within the parameters set by their principals.

Lau September 7, 2011 at 1:45 PM  

Hi azfar

Thanks for your comments. I suppose I provide an I dependent view as I do not hold an underlying agenda. Most agents justify their sales and competitors down play their enemies.

I agree. As will all systems. It is driven by the carrot and the stick. It is only perfectly normal to expect the current outcome given the present status of incentives and regulation.

financialray September 9, 2011 at 8:26 PM  

I think most people, when young, would like to have whole life insurance because of the cash value. Anyway, when just starting to work, cannot afford to buy much insurance. So I bought whole life when I first started working many years ago and the cash value now almost exceed the premiums paid.

At my age now, I also think whole life is not able to provide sufficient coverage and the premiums too high.
So I have mortgage insurances which is basically a decreasing term insurance.

Lau September 9, 2011 at 11:01 PM  

Hi FR,
I think it is not when young only. It is a general idea.
But it is even worse when young because the coverage required is higher but the budget is lower.

financialray September 10, 2011 at 10:23 AM  

Hi Lau,

I think when people are in their 20s, the probability of getting one of the 30 critical illnesses is very low and the premiums correspondingly lower. So opting for whole life because of its cash value does look attractive when we are in our 20s. So let's say someone my age who bought term insurance when we were in our 20s may see that my whole life now has cash value. Of course it also depends whether he had planned his financial life wisely and with much discipline or perhaps he could have squandered the money saved by buying term eg buying a car.
I agree with you though that at an older age, like myself now at 40, term insurance is the way to go and for me, nothing better than mortgage insurance.



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