Personal Finance

Insurance companies are billion dollar businesses. Whether or not you agree with their policies (or their agents’ ethics), managing an insurance business is no mean feat. However, as much as insurance companies might be in over their heads about revenue figures, the central focus should still be on clients’ welfare. We’ll let you in on what exactly happens behind closed doors after insurance companies take your premium payments, so you won’t have to be shortchanged during your insurance shopping.

1. Low premiums may hide real costs

You know the saying: if something is too good to be true, it probably is. Premiums that seem unusually low for a crucial plan should set off alarm bells. Could it be that the insured amount is a lot lower? Are you exposed to narrower claims eligibility compared to rival products? Would you be paying a higher deductible after claiming for hospitalization? Don’t let that couple of bucks saved land you on the short end of the stick.

2. Your credit history is a major criteria


As with age, profession and lifestyle habits like smoking, credit history is one of the lesser-known factors that insurers will take into consideration during underwriting. It is not too different from applying for a credit card at a bank, really; if Greek bonds appear a safe haven next to your credit record, then you could very well be looking at higher premiums and lower coverage. Or, in the worst-case scenario, your application gets rejected altogether.

3. Insurers are profit-driven

Insurance companies base their business around making sure you are well protected against untoward events. Insurance is indeed important, but at the same time, they are also all about the dollars and cents. Just because the commission-driven agent is your personal friend does not mean he is not the slightest bit sold on the grandiose idea of joining the million-dollar club. As a result, he could be pushing plans with heavier annual premiums (e.g. whole life) rather than a term policy (which costs significantly less) you really need. Your best bet is to either engage in some research on insurance comparison websites, or reassess your needs independently.

4. Insurers profit more from investments

This little secret is not only exclusive to investment-linked policies (ILP), in which the insurers openly allocate your premiums into funds of your choice. Instead of hiding them under a mattress, premiums on your policies are pumped into their investment portfolios to accumulate interest revenue. That explains why you would have to wait till the cows come home before you get your well-deserved payout. The longer the money sits in the investments, the more insurers would laugh their way to the bank.

5. Payouts can be very slow

It is true that insurers are very invested in your personal well-being. If nothing ever happens to you, you are essentially giving them free handouts to grow their nest. But, the reality is none of us are made of steel; accidents and illnesses do strike. Therefore, one or two things here might happen once you file a legitimate claim: insurers will either delay the payment for as long as humanly possible or settle surefire cases with minimum compensation. Why, you may ask. It is not that they are trying to worm out of your case for the sake of it, but they stand to lose out on investment gains the faster they send out the cheque. Still, you should continue the persistence considering that hospital bills can induce heart attacks.

6. Quick payouts may mean a cheap settlement

Then again, don’t be too quick to jump for joy when you are granted an immediate payout. The amount they approved could just be an initial offer and the real amount you should be getting could be a lot more than what the insurance company offers. If you have the luxury of time and patience, perhaps it is not a bad idea to appeal and play into their waiting game in exchange for a higher payout.

7. It is better for you to use more than one agent

Your agent represents just that one insurer and he is responsible for marketing their products only. The policy which he insists is best for your lifestyle might not measure up to a rival’s in terms of suitability. Remember, there are subtle differences between similarly tiered plans offered across all the insurance companies. Unlike dating, there is no harm and foul seeing someone else on the side to get a second opinion.

8. You can negotiate for lower premiums

The No-Claim Discount on motoring insurance aside, haggling for cheaper premiums on your health plans is not entirely Mission Impossible. Singaporeans are hardworking corporate warriors by day and opportunistic bargain hunters by night, so there is no shame in asking if you have a clean bill of health and cleaner credit history. Your agent might insist there is only one fixed price, but don’t lose hope. Shopping around for other insurers can help uncover some sweet deals such as first year premium discounts or, for the more generous ones, discounts on the full term of the policy.

9. Insurance companies like to make the claims process complicated

In light of dishonest practices on the claimant’s part, stringent regulations have been imposed and average processing time for claims has been dragged. According to Life Insurance Association of Singapore (LIA), there are up to six weeks’ worth of correspondence between the claimant and insurer, before the latter deems the submitted proof accurate and issues the payout. If the whole process takes more than two months, the insurer will pay out an interest. Even if your claim is clean, know that each personnel in the insurance company is well versed in the art of negotiation: there is still a possibility that they would use technical definitions in their written terms to disqualify you. Either way, this is part of their strategy to keep their money invested just a little longer.

10. “Anything you say may be used against you in a court of law.”

The next time you justify your claims to a loss adjuster, be very careful. In true 007 fashion, his audio recording pen could secretly be capturing everything you say. In all seriousness, the General Insurance Association (GIA) has reported a worrying increase in fraudulent travel claims in Singapore and you cannot really fault the insurers for investigating your statements to make sure there are no discrepancies. Baggage loss and ninja pickpockets are very real holiday tragedies and you are entitled to compassion and insurance claims, but think twice before you want to embellish your story to snag higher payouts.