<TABLE border=0 cellSpacing=0 cellPadding=0 width="100%"><TBODY><TR>Cheaper to invest in unit trust than regular-premium investment-linked products
</TR><!-- headline one : end --><!-- show image if available --></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->I REFER to Sunday's letter by Great Eastern Life (GE Life), 'Policy charges: Insurer to look into complaint against agent'.
It refers to a letter by Madam Olivia Kam ('Agent didn't mention hefty charges', Sept 20), in which she tells how her insurance agent did not mention the high commission charges to buy a regular-premium investment-linked product (ILP).
These typically charge one to two years of premiums, with the money going to the agent and insurance company. None of it goes towards the investments Madam Kam wanted to buy.
Investors can get almost the same thing without the high commissions by buying a unit trust. Most have a regular savings option which is always free.
Another way to avoid the commissions is to purchase a single-premium ILP every month. It is inexpensive but involves more paperwork than buying a unit trust.
In its letter, GE Life said: 'We take a serious view of mis-selling by our agents.'
That is good but how does GE Life define 'mis-selling'? Suppose the insurance agent does not mention the less expensive choices of unit trusts and single-premium ILPs? Is it mis-selling?
Disclosing cheaper alternatives would almost certainly kill the sale, so GE Life is unlikely to define mis-selling in this way.
A better way to assure full disclosure would be to print the following in bold red letters at the top of each benefit illustration and brochure:
'This regular-premium ILP requires you to pay X years and XX months of premiums to the agent and insurance company.
'Unit trusts and recurring single-premium ILPs provide almost the same thing without this charge.'
It ensures that potential ILP investors will get the message. It is more certain than vague verbal instructions by life insurance companies to their agents, which cannot be monitored.
Larry Haverkamp
<!-- end of for each --><!-- Current Ratings : start --><!-- Current Ratings : end --><!-- vbbintegration : start -->
</TR><!-- headline one : end --><!-- show image if available --></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->I REFER to Sunday's letter by Great Eastern Life (GE Life), 'Policy charges: Insurer to look into complaint against agent'.
It refers to a letter by Madam Olivia Kam ('Agent didn't mention hefty charges', Sept 20), in which she tells how her insurance agent did not mention the high commission charges to buy a regular-premium investment-linked product (ILP).
These typically charge one to two years of premiums, with the money going to the agent and insurance company. None of it goes towards the investments Madam Kam wanted to buy.
Investors can get almost the same thing without the high commissions by buying a unit trust. Most have a regular savings option which is always free.
Another way to avoid the commissions is to purchase a single-premium ILP every month. It is inexpensive but involves more paperwork than buying a unit trust.
In its letter, GE Life said: 'We take a serious view of mis-selling by our agents.'
That is good but how does GE Life define 'mis-selling'? Suppose the insurance agent does not mention the less expensive choices of unit trusts and single-premium ILPs? Is it mis-selling?
Disclosing cheaper alternatives would almost certainly kill the sale, so GE Life is unlikely to define mis-selling in this way.
A better way to assure full disclosure would be to print the following in bold red letters at the top of each benefit illustration and brochure:
'This regular-premium ILP requires you to pay X years and XX months of premiums to the agent and insurance company.
'Unit trusts and recurring single-premium ILPs provide almost the same thing without this charge.'
It ensures that potential ILP investors will get the message. It is more certain than vague verbal instructions by life insurance companies to their agents, which cannot be monitored.
Larry Haverkamp
<!-- end of for each --><!-- Current Ratings : start --><!-- Current Ratings : end --><!-- vbbintegration : start -->
