I have a case in which the client bought a medical insurance from the insurer directly. He went to the insurer without any financial adviser. The insurer had two products. One only covers up to age 75 while another life time cover. The life time cover is an integrated shield plan in which claims is highly efficient because it is integrated into MOH’s Mediclaim system. If I am the adviser I would definitely recommend the shield plan that provides life time cover afterall the largest hospitalization cost incurs at the end of a person’s life. However, the business center staff recommended the one that covered up to age 75 only. Why?
The product that provides no lifetime cover pays 393 * 25% = $98.25 of commission.
The shield product pays (142/1.07 – 30) * 25% = $25.68 in commission.
To me these two commissions are meaningless because it is so little but nevertheless the staff recommended the one that has 3.83 times of commission compared with the shield plan. Thus, the client’s interest was detrimental.
Many people thinks that by buying “direct” from the product manufacturer is the best deal because there is no middle man. They are dead wrong. I have colleagues and friends who used to work with the insurers’ business center. Some of the frontline staff are purely commissioned based like any other advisers. Some are salaried but with very high quota. Therefore, they are pressured to sell and could mis-sell.
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