it seems so easy to be an insurance agent in singapore. really. why else would there be so many of them? I bet you’re related to at least two, and if your ex colleague calls you up and asks you out of the blue for coffee, you’re probably wondering if he recently made a career change. in fact, the phrase “insurance agent” has become such a stigma that more politically correct terms are now referred to as “financial advisors,” “life planners,” or “life consultants.”
But in all seriousness, insurance is important and so are the agents who advise you on what to sign up for. It is in your best interest to be adequately covered for anything that may happen to you, especially if it is an illness or accident that would make you a financial liability for your loved ones.
Reading: How does insurance agent make money
A good insurance agent should sell you the best policy that is within their means and that, however, can cover you in case something serious happens to you. But being an insurance agent is a job, after all, and because it’s commission-based, you need to consider how much of the policy premium you’re paying is actually going out of pocket.
wait, wait, wait… are you going to disclose insurance agent commission rates? Isn’t that supposed to be a secret?
First of all, we’re not going to reveal exactly how much each insurance company pays its agents. that’s not public knowledge for a reason, and they’re updated relatively frequently each year anyway. however, what we will reveal is the general market range for fees. Second, the fact that there are so many insurance agents (and former insurance agents!) in Singapore means that this is probably one of Singapore’s worst kept secrets.
Here, we rank products by type from the highest commissions earned in percentage terms to the lowest.
huh? Does that mean up to 50% of the premium I pay goes to the agent?
See also: Guaranty Associations/Funds
for certain products, yes, exactly. That’s why everyone wants to be an insurance agent. Let’s say you sell a product with premiums costing $2,000 per year. with 50% commissions, in your first year, that’s $1,000 per product sold. just sell 100 of these products to your friends, and these suck, I mean, the customers will have earned you $100,000 in commissions.
For that amount of money, you’d probably be willing to sell your soul.
So what should you do now that you know the commissions that insurance agents charge?
here are 3 things to help you make a better decision when buying insurance from your financial advisor:
1. understand why some insurance agents are more likely to sell you a product
If an insurance agent really thinks an insurance policy is good for you, ask yourself if he really means it’s “good for him.” ironically, it is understood that the better an insurance policy is for the client, the lower the commission the agent receives. why? because good products tend to sell themselves and don’t need too much additional sales help from the insurance agent.
Similarly, agents traditionally earn more by selling you a product that lasts more than 20 years. But ask yourself, do you really need to be locked into an insurance product for such a long period of time? remember that some insurance products have penalties that discourage you from canceling. It can be very expensive to cancel the policy before the lock-in period is over, and in the meantime, if you have cash flow problems, an expensive premium will be a financial burden.
2. understand that you should not buy an insurance policy just to “help” the agent
We understand that it is probably related in some way to your financial advisor. maybe it’s your uncle, your high school classmate, that dancer you met at the bar who gave you a really…memorable experience and is now threatening to tell your spouse. well, aside from the last one, you probably don’t owe them anything.
Except for integrated protection plans, which earn commissions as long as you pay the premium, most policies earn significantly less after the first year and earn nothing for your financial advisor after the fifth or sixth year.
does that mean the exorbitant premium you continue to pay annually? none of it will go to your financial advisor. the agent no longer has any incentive to care about his well-being, other than genuine concern that not everyone can show. so if he wants to help his friend or family member, he does not do it by buying a policy just to help them, but do it because it is beneficial for both of them. It may mean $1,000 in commissions for them, but it will cost you much, much more in the long run.
3. remember that insurance is still important to ensure you and your loved ones are protected
Again, we’re not saying insurance is bad. Everyone should be covered by insurance that they can afford and that can cover them to the best of their ability. A true financial advisor will have your well-being in mind, and the monetary benefit to them will come from the good advice and planning they give you.
Make sure your advisor reviews all the policies you’re interested in and don’t try to promote another product as “better” but end up costing more. Ultimately, if you don’t feel comfortable working with his financial advisor, don’t feel obligated to stay with him. There are, after all, other agents to choose from, and when you find the right one, you’ll both enjoy a mutually beneficial relationship.
Are you surprised how much insurance agents make on some products? let us know how you feel.