3 Things You May Not Know About Your Insurance Agent
You might already have noticed this, that the term ‘insurance agent’ has long been replaced by fancier versions such as ‘life planner’ or ‘financial advisor’. It’s not hard to imagine why they need an image overhaul.
Insurance agents have, for the longest time, evoked some sort of a mixed love-hate response. Some people want to avoid them unless absolutely necessary, and some have truly built a good relationship with their agents and trust them to dispense sound financial advice and suitable product recommendations.
Before you go shopping for an insurance policy, there are things that you need to watch out for when working with an insurance agent to get the most out of your hard-earned money.
How do insurance agents earn money?
In Singapore, most agents do not receive a fixed salary and all their income comes from sales commissions. This is why some of them may come across as very ambitious, driven, and some can be a tad too pushy.
Their bread and butter depend on how well they can hustle, and on the type of insurance and premiums that customers are signing up for.
In general, a life insurance plan will earn the agent up to 50% of the annual premium in the first year. This decreases to about 20% in the second year, 10% in the third year, then 5% for the fourth and fifth year.
Healthcare or accident policies tend to have lower commission rates and insurance companies regularly update their commission structures.
How do agents usually sell?
This varies and is largely dependent on the agent. However, it’s commonly known that many agents start their careers by first selling to their primary network of family and friends.
This is not necessarily a bad thing, as you are able to determine whether or not you can trust your own friend or relative who is an agent, and it helps to know that they are most likely within easy reach if you have any issues.
The next circle of sales leads usually come as referrals from friends and relatives. That’s why you shouldn’t be surprised if long-lost friends begin contacting you about your financial planning needs.
Another common way to sell, which many Singaporeans would have seen by now, is through roadshows and street promotions. People who have asked you if you’d like to “help them complete a survey” are usually from insurance companies.
How should you deal with an agent?
Be prepared before you meet an agent
Knowing that an insurance agent earns his income from the type of insurance that he or she sells to you is important. With so many insurance agents in Singapore, there are bound to be really good ones who truly recommend suitable policies, and there are those who will pressure you into buying products with high premium that you don’t necessarily need.
With the availability of information on the Internet, it’s not difficult to learn about the policies that are available from finance websites and blogs or even forums.
At the very least, you’re getting information that you can process on your own without the pressure of a face-to-face session with an insurance agent, who may be very persuasive with top-notch salesmanship skills. It’s good to arrange a meeting with one when you understand what you want or need.
Don’t be pressured into helping an agent-friend
There’s no need to shun your friend-turned-agent because you’re afraid of being a sales target. However, realise that what you’re about to buy is as good as a life-long commitment, so helping out a friend at your own expense is certainly not the way to go.
On the other hand, there are certain types of insurance policies that are indeed very helpful and almost indispensable in Singapore, such as the Integrated Shield plans that work like private insurance plans for hospitalisation.
For basic policies such as these that many Singaporeans get and benefit from, it doesn’t hurt to support your friend while you protect yourself.
Pay attention to your agent’s way of selling
Does your agent try to use scaremongering tactics to pressure you into signing up for a high-insurance policy? Is your agent overly pushy, or does he or she seem to disappear once you’ve signed on the dotted line?
A good agent, especially at the start, will pay more attention to what you need and listen to your concerns before trying to sell you any policy. He or she will be patient and thorough when explaining policies to you, and will not try to sell you policies with premiums that feel like too much of a stretch.
A good agent should also catch up with you at least once a year to do a review of your insurance plans to ensure you are still adequately covered.
The fact that insurance agents make money purely from commission, you don’t have to be put off by that just because they make better commission when they sell you more expensive policies.
As long as you are clear about your needs and are not in a hurry to buy a policy for the wrong reasons (e.g. helping a friend), you will be able to find an agent whom you can have a good relationship with.