This is probably another one of our controversial articles, where instead of being our usual self and bash insurance agents, we are going to write about why we genuinely think they are important and should still exist.
It is a common perception that insurance agents have a bad reputation - mostly because of their pushy, aggressive, and questionable sales practice.
Most of us would probably rather go to a dentist than meet an insurance agent.
And as much as we want to think they are not what we want or need, they definitely play an important role in our financial roadmap!
Today, we are going to be unconventional and write about the people we often mock about: Insurance Agents.
We will be explaining why we think we need insurance agents in our lives.
PS: we will be using 'insurance agent' and 'financial consultant' interchangeably in this article. In this article, both will mean the same, although there might be some difference in the real world.
Importance of Insurance
It acts as the "protection" layer, protecting you and your family against expensive events like death, sickness, hospitalisation etc.
You will need it to cover these basic things like death, TPD, and hospitalisation, everything else can be "optional".
Optional include things like endowment, ILPs, etc, which are generally the higher income-generating products for the insurance agents.
There's nothing wrong with trying to sell higher-margin insurance to customers IF the customers need it.
Also, insurance agents have families to feed as well.
It is only wrong if they are not suitable for the customers, or if the customers are conned into buying them.
Kind of like buying the 256gb iPhone instead of 128gb.
It's a higher margin for Apple to sell the 256gb model but it really depends at the end of the day if the customer really needs it.
The problem with insurance is, we do not buy them automatically, because they are not life-threatening or required on a frequent basis.
If you starve, you will die; hence your stomach gives you the signal to go buy food and eat.
The problem with insurance is there is no such mechanism at play, and by the time you realise you need insurance, it's already too late.
If you realised you haven't left any money for your family to take care of themselves in the event of your early death, you cannot reverse and buy insurance to get the payout.
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Importance of Insurance Agent
That's where the importance of an insurance agent comes in.
Because they exist, and because they contact ("force", in a good way) you to go through your financial roadmap, they are able to help you identify the gaps and give you the appropriate advice on how to get your financials on track (or at least ensure sufficient protection for you and your family).
I studied finance and investment to know the importance of getting insured.
But for people who are teachers, engineers, doctors, or other professions that are not in the "money business", this is not an intuitive thing for them.
And so the most realistic way for them to get their financial roadmap on track is to get advice from an insurance agent.
I don't think people would wake up one day, suddenly realise they need to get $X amount of life insurance and proceed to buy one themselves. This just does not happen in real life.
Hence the importance of an agent is they literally force you to sit down, walk you through the whole roadmap, and plan your finances.
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Dilemma of an Insurance Agent
Of course, insurance agents only make money if you buy policies from them.
And the money they earn from your premiums tends to drop after the first few years.
So for example, after you buy insurance from your agent, maybe they get
- First-year 10% of the premium as their commission
- Second-year 5% of the premium as their commission
- Third-year 1% of the premium as their commission
- Fourth-year 0% of the premium as their commission
And since they have to do an annual review of your financial health, it makes sense for them to take that opportunity to either sell you a bigger plan (up-size) or sell you some other plans.
If they don't do that, how do they feed their families?
Furthermore, it's been proven that it's easier to up-sell and cross-sell to existing customers than to new customers.
So if not you, then who? 🤷♂️
But, there's only so much insurance one person need. Eventually, as a customer, you will no longer need any additional insurance.
However, to make ends meet, sometimes, some agents, would have to sell more despite already having enough, just like what Christopher said in his video below.
Christopher went from being an insurance agent to starting a fee-based wealth advisor after a client told him "surely there must come a time whereby I have enough insurance."
Not saying that all insurance agents are like that, but you as a customer will eventually reach a point where you just have enough insurance. Then what?
Do you continue to buy more insurance to support your agent? Or do you stop buying what your agent suggests?
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Conclusion
We think we still need insurance agents going forward (says the guy who was thinking of becoming one).
But there's only so much insurance one needs to get.
Eventually, we all just need to be able to say 'No' when asked to get more insurance.
What do you think?
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We need insurance, but we don't really need insurance agent --- which is an old-fashioned & very expensive & inefficient & oftentimes inaccurate method of insurance sales.
ReplyDeleteWe need more insurance education than agents. Ideally education at sec4 or poly. Show real life photos or short videos of people dying becoz they can't afford good medical treatment, or dependents losing their homes etc.
Then point them to cheaper alternatives of buying insurance like CompareFirst.sg