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You are here: Home / Insurance / Direct Purchase Insurance – a must read before your purchase

Direct Purchase Insurance – a must read before your purchase

7, April 2015 by Wilfred Ling 7 Comments

Last Updated on 16, January 2017

The salesman is no longer neededToday is the official launch of the Direct Purchase Insurance. This means you can buy insurance directly from the insurance company without financial advice. More importantly it means there is no commission and hence premiums should be cheaper. This is suitable for those who are financially savvy and makes their own decisions.  What you can buy are term insurance and whole life insurance.

The Direct Purchase Insurance has been deliberately standardised by Monetary Authority of Singapore. The features of the Direct Purchase Insurance can be found at this link HERE. Basically you can only buy up to $400,000 of sum assured from one insurer with a sub-limit of $200,000 of whole life policy.  Note that these limits are per insurer basis. This means that if your need is higher, you can actually get an even higher coverage by buying from multiple insurers. However, you should declare you are making concurrent application to multiple insurers for financial underwriting purpose. If you cannot justify the high sum assured, the insurer will counteroffer you a lower sum assured or reject your application altogether.

Take for example, let’s say you have 4 dependents (1 spouse and 3 children) and the monthly expense for each dependent is $1000 a month for 20 years. The maximum coverage required without taking account of time value for money is 1000 x 12 x 20 x 4 = $960,000.  Obviously you need to purchase the Direct Purchase Insurance from at least two insurers.

The links to the Direct Purchase Insurance portal are mostly not obvious in the respective insurance companies’ websites. So I have compiled the list of links of the Direct Purchase Insurance as follows:

  1. Direct Purchase Insurance from NTUC Income. Have to buy from its branches.
  2. Direct Purchase Insurance from AIA. Have to buy from its branches.
  3. Direct Purchase Insurance from Aviva. Have to buy from its branches.
  4. Direct Purchase Insurance from Manulife. Have to buy from its branches.
  5. Direct Purchase Insurance from AXA Life. Call customer service hotline to buy.
  6. Direct Purchase Insurance from Prudential. Have to get quote and buy from its branches.
  7. Direct Purchase Insurance from Great Eastern. Have to buy from its branches.
  8. Direct Purchase Insurance from Tokio Marine Life Insurance. Have to buy from its branches.
  9. Direct Purchase Insurance from Etiqa Insurance Pte Ltd. Can buy online.
  10. Direct Purchase Insurance from Zurich Life Insurance. No information on the how to buy.
  11. Direct Purchase Insurance from HSBC Insurance (Singapore) Pte Ltd. Have to buy at its branches.
  12. Direct Purchase Insurance from Overseas Assurance Corporation Limited. Cannot find the web link.

Since most of the insurers require one to purchase the Direct Purchase Insurance at their branches, it also means there is a possibility that customer service staff may upsell you things you do not want.  If fact, the Direct Purchase Insurance could be the best form of lead generation for the insurers! Please note that there is nothing in regulation which prohibit the customer service staff to sell you other things. Also, it is possible for the insurer to impose the staff a sales quota just like relationship managers at the banks.

Premiums comparison

For whole life insurance, I cannot be bothered to compare because the whole life product from Direct Purchase Insurance is payable until either 70 or 85 years old. Nobody buys whole life with premium period so long. Typically it is 20 or 25 years limited premium.

So I only compare term insurance. I use a quote for male, non-smoker and birthday 1 January 1985.  Sum assured is $400,000 covering death ,TPD and CI. Coverage period is 20 years. Here are the results:

Direct Insurance Product (Term only)Annual Premium
AXA Life632
NTUC Income852
Great Eastern880
Overseas Assurance Corporation880
Zurich Life Singapore886
Tokio Marine Life906
Etiqa Insurance908
Prudential Assurance960
Manulife963
HSBC Insurance Singapore1084
AIA Singapore1287

AXA Life turns out to be the cheapest and AIA turns out to be the most expensive.

How about comparing the term insurance with those that are purchased from financial advisers? Here is a table to compare:

Annual Premiums Remarks
Direct - AXA Term Lite 632.2 31 CIs including TI as part of the basic policy
AXA Term Protector 901.21 Purchase through an adviser. 37 Cis.
Aviva MyProtector-Plus 937.2 Purchase through an adviser. 37 Cis including TI as part of the basic policy
ManuSignature Term 1146.8 Purchase through an adviser.  37 Cis including TI as part of the basic policy

As it can be seen that the Direct Purchase Insurance from AXA Life is much cheaper than the other 3 term insurance. However, a closer look revealed that the comparison is not apple to apple. In recent times, many insurance companies cover 37 critical illnesses. On the other hand, the Direct Purchase Term insurance covers only 31 Critical Illnesses inclusive of the Terminal Illness as part of the basic policy.

So, what are the additional 6 critical illnesses that are not included in the Direct Purchase Insurance? These are:

  1. Poliomyelitis.
  2. Progressive Scleroderma.
  3. Systemic Lupus Erythematosus with Lupus Nephritis.
  4. Loss Of Independent.
  5. Other Serious Coronary Artery Disease.
  6. Apallic Syndrome.

I have appended the six definitions of these critical illnesses below this blog. Judge for yourself whether these additional 6 critical illnesses are worth paying more for.

So should you engage a financial adviser or buy directly from the insurer?

The limit of $400,000 is not some magical value. It is based on a research called Protection Gap Study in 2012 which was commissioned by the Life Insurance Association. That research shown that the average protection needs of Singaporean is  $400,000. This means if you buy from the Direct Insurance Purchase, you will have no shortfall for life insurance – assuming you are an average joe Singaporean.

Here are things which a financial adviser can do:

  1. A financial adviser can help you to calculate how much insurance you need. You do not need to guess. But then again, to purchase directly, you must (i.e. mandatory) use the Insurance Estimator hosted by CPF. It is one of the checklist you must do before the purchase. The link can be found here: Insurance Estimator. Hence, the role of the financial adviser for calculation purpose is being replaced by a software (opps).
  2. A financial adviser can help you identify the difference between products. But than again, I have already highlighted that a major difference you need to note is that the Direct Purchase Insurance has 31 Critical Illnesses whereas other term insurance has up to 37 critical illnesses.
  3. A financial adviser can help you to claim whereas if you buy directly you have do everything for claims yourself. However, given the high attrition rate of the finance industry, your financial adviser may not be available to help your claim anyway. All financial advisers look forward for a greener pasture, retire and definitely will die. You can test the call centre of the insurers by calling them.  In reality, many claims are done by the clients directly or through advisers (who were not the original advisers who sold the product) with authorisation from the client.
  4. A financial adviser can provide you with a more holistic insurance solution. Not all insurance products are available on the Direct Insurance Purchase. Insurance products that are only available from financial advisers are: Early payout major illness, whole life with 25 years or less limited premium, disability income insurances, endowments, investment-linked policies and integrated private shield policies. As the Direct Insurance Purchase's riders must be the same as the basic sum assured, you can only buy term configuration of other combination (such as $500,000 covering death with $250,000 accelerating critical illness) from a financial adviser.
  5. If you are looking for someone to help you do financial planning, you can approach a financial planner. A financial planner is always a financial adviser but a financial adviser is usually not a financial planner.  See:  What is the difference between financial planner and financial adviser ?

Still, consumers must be careful when they buy direct without advice. Here is a letter I wrote to Straits Times on why consumers must be careful when buying direct and why financial advisers must change their mindset otherwise they will become obsolete : Care Needed When Buying Insurance Direct.

Here is my advice to consumers: If you want advice and yet want to buy the low cost Direct Insurance Purchase, you may want to read this article: HERE.

Get the Guide on How to Interpret Benefit Illustration before you purchase direct

Before you go ahead to purchase the insurance directly, one of the document you will receive is called the Benefit Illustration. You will be asked to declare that you have read and understood the Benefit Illustration. You cannot ask the counter staff to explain to you the Benefit Illustration as that is constitutes advice.

But no worries, I have a simple infographics from MoneySense on how to interpret the Benefit Illustration.

The the infographics on how to interpret the Benefit Illustration is available to my subscribers.

If you are on my subscriber, you just need to key in your name and address and you will be directed to the link. If you are not my mailing list subscriber, do the following:

  1. Enter your particulars below.
  2. An email will be sent to you to confirm your subscription to my mailing list. Once you are on my mailing list, you will receive useful regular financial planning articles from me. (You can always unsubscribe anytime.)
  3. We will email you the link as soon as possible.








Download the MoneySense Infographics on Interpreting the Benefit Illustration Now!


Appendix

Definition for Poliomyelitis

The occurrence of Poliomyelitis where the following conditions are met:

  • Poliovirus is identified as the cause,
  • Paralysis of the limb muscles or respiratory muscles must be present and persist for at least 3 months.

Definition for Progressive Scleroderma

A systemic collagen-vascular disease causing progressive diffuse fibrosis in the skin, blood vessels and visceral organs. This diagnosis must be unequivocally supported by biopsy and serological evidence and the disorder must have reached systemic proportions to involve the heart, lungs or kidneys.

The following are excluded:

  • Localised scleroderma (linear scleroderma or morphea);
  • Eosinophilic fascitis; and
  • CREST syndrome.

Definition for Systemic Lupus Erythematosus with Lupus Nephritis

A multi-system, multifactorial, autoimmune disorder characterised by the development of autoantibodies directed against various self-antigens. In respect of this contract, systemic lupus erythematosus will be restricted to those forms of systemic lupus erythematosus which involve the kidneys (Class III to Class V Lupus Nephritis, established by renal biopsy, and in accordance with the WHO Classification). The final diagnosis must be confirmed by a certified doctor specialising in Rheumatology and Immunology.

The WHO Classification of Lupus Nephritis:

  • Class I Minimal Change Lupus Glomerulonephritis
  • Class II Messangial Lupus Glomerulonephritis
  • Class III Focal Segmental Proliferative Lupus Glomerulonephritis
  • Class IV Diffuse Proliferative Lupus Glomerulonephritis
  • Class V Membranous Lupus Glomerulonephritis

Definition for Loss Of Independent Existence

A condition as a result of a disease, illness or injury whereby the Life Assured is unable to perform (whether aided or unaided) at least 3 of the following 6 "Activities of Daily Living", for a continuous period of 6 months.

Activities of Daily Living:

  • Washing - the ability to wash in the bath or shower (including getting into and out of the bath or shower) or wash satisfactorily by other means;
  • Dressing - the ability to put on, take off, secure and unfasten all garments and, as appropriate, any braces, artificial limbs or other surgical appliances;
  • Transferring - the ability to move from a bed to an upright chair or wheelchair and vice versa;
  • Mobility - the ability to move indoors from room to room on level surfaces;
  • Toileting - the ability to use the lavatory or otherwise manage bowel and bladder functions so as to maintain a satisfactory level of personal hygiene;
  • Feeding - the ability to feed oneself once food has been prepared and made available.

This condition must be confirmed by the company's approved doctor.

Non-organic diseases such as neurosis and psychiatric illnesses are excluded.

For the purpose of this definition, “aided” shall mean with the aid of special equipment, device and/or apparatus and not pertaining to human aid.

Definition for Other Serious Coronary Artery Disease

The narrowing of the lumen of at least one coronary artery by a minimum of 75% and of two others by a minimum of 60%, as proven by coronary arteriography, regardless of whether or not any form of coronary artery surgery has been performed.

Coronary arteries herein refer to left main stem, left anterior descending, circumflex and right coronary artery.

Definition for Apallic Syndrome

Universal necrosis of the brain cortex with the brainstem intact. This diagnosis must be definitely confirmed by a consultant neurologist holding such an appointment at an approved hospital. This condition has to be medically documented for at least one month.

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Comments

  1. Ivan says

    7, April 2015 at 5:44 pm

    Good job Wilfred, well researched..

    Reply
  2. xyz says

    9, April 2015 at 11:10 am

    Read this Business Times article from MoneySense about how to interpret Benefit Illustration.

    They also mention that if your aim is protection PLUS growing money, it may be better to use term insurance and regular savings into diversified portfolio of stocks & bonds. Instead of buying high-cost products from insurers such as wholelife, endowments or investment-linked plans.

    http://www.moneysense.gov.sg/~/media/Moneysense/News%20and%20Events/Media%20Articles/Business%20Times/Endowment%20Policy.pdf

    Reply
  3. zhummmeng says

    9, April 2015 at 6:13 pm

    Only a few insurers are serious and sincere about providing affordable insurance to the public and the poor to solve the under insurance situation in Singapore. The rest are just going with the motion and trying to be obedient and compliant. Look at the lowest to the highest, they are miles apart. Any extra benefits from the high ones? No! But why their premium still so much higher. Maybe they are not interested in this “niche” market” ; cannot make money. Or they want to protect their agents? If that is so their agents will soon have to eat grass.
    As what Wilfred predicts, the good advisers can provide advice at nominal fee to those MANY who may want to buy direct but do not know how. They can help them save a lot of money and are willing to pay a nominal fee for this advice.
    Salesmen or conmen they are very creative and In fact many of them are already concocting and scheming how to con their customers into beleiving that buying direct is not good, eg. no agent to service you in the event of claim, a popular mantra.among insurance agents and the products are not good..THEY DON’T HAVE LIMITED PAYMENT FEATURES!!!!!!!!!!!and etc etc and you have to pay for life… These are the schemers and liars you have to watch out..You see, only half truth and half lies.
    However, there is lobby group who is pushing for inclusion of endowment and other dubious scammed products like regular ILPs and when they are included lets see what these insurers will do…
    Well, I see these changes as ‘natural selection” process to weed out and get rid of the salesmen and women who don’t provide quality advice and of course the conmen and women too.. The problem is with the conmen and women ; they are more adaptable and can morph and can camouflage their practices like camellion to look like “EXicutive Financial Consultant.
    Anyway, it is too early for any verdict.

    Reply
  4. MGG says

    11, April 2015 at 1:01 am

    Aviva Term -Direct is about $792 for a non-smoker, 35 years of age.

    Reply

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