This article is mainly written for the existing life insurance agents who have outgrown the agency environment; those who are considering a career in life insurance and financial planning; and life insurance purchasing public who want to know the changes happening in the industry that will benefit them.
This is the 5th and final article of my series of articles written to inform agents who realise the limitation of agency contracts and are looking forward to a better future in the industry.
In my previous article, I have listed three things that agents needed to adjust in order to move successfully from agency to financial advisory (FA) platform – the need for change in thinking; to be able to handle multiple product providers and to be competent in estate and investment planning for clients.
Today let’s look at how agents can get rid of the frustrating restrictions imposed upon them in agency system by moving on to FA platform.
Non-medical limit (NML)
As an agent contracted with a single principal life insurer, he or she is very much constrained by the non medical limit (NML) of that insurer.
NML is the sum assured limit set by a life insurer at various age ranges of an insured that he or she is not required to go for medical examination when applying for life insurance. The insured only needs to answer truthfully all the health questions in the life application form.
However, all existing sums assured approved by the insurer will be added to determine the extent of medical tests required when an insured applies for new insurance coverage.
Thus, agents face a stumbling block when they want to sell bigger sum assured policies. The hassle that comes with medical underwriting always wears heavily in their minds. Thus many agents are reluctant to sell level term insurance because the premium is low and the commission income received may not be worth the hassle. This has resulted in certain kind of peculiar selling behaviour among life insurance agencies.
Due to the underwriting system of the insurer, many agents tend to introduce higher premium policies even though the clients only have protection needs. Or some agents simply resort to just introducing savings policies which offer relatively low coverage with high premiums.
In contract, clients with pure protection needs will be better served through the FA platform, applying for high coverage but low premium policies as we can help clients take full advantage of the non-medical limits (NML) offered by our multiple life insurers.
For instance, all our seven Malaysian registered life insurers can offer up to RM500,000 NML to each insured between the age 16 to 35. That means through FA platform, we can apply up to RM3.5 million non-med limit (NML) for each insured.
And in FA company, the licenced offshore life insurer can offer another USD$250,000 non-med limit to each insured. That means another RM750,000 NML that our client can apply. Further more, the policy can be issued in US dollars.
With the higher combined NML from multi-insurers, agents moving to FA platform can remove such ceilings imposed by the agency system, and are able to propose higher sum assured to their clients.
Choosing only the best products from multiple life insurers
Since FA platform can source products from multi insurers, agents moving to FA platform will be able to select the most innovative products from up to eight life insurers on SFP platform rather than getting frustrated with limited product offer from their principal. And agents can focus their energy on fact-finding and making a better product recommendation rather than talking down their competitors.
Sourcing products through FA channel is more exciting compared with trying to just promote single company’s products. We can compare premium rates and offer the lower premium products with same types of benefits. In my earlier article, I quoted a case where the premium difference can be as much as 42 per cent for similar type of coverage. The clients are definitely more receptive when we can offer to compare products form different insurers.
FA representatives can also compare rider benefits from different insurers to recommend to clients the one with the best benefit packages.
It is a trend now that consumers in the market are also begin to shop around, requesting for insurance quotes from different agents representing their respective life insurers and trying to do their own comparisons.
Thus it definitely makes better business sense for agents to move on to multiple life insurers platform.
Freedom to choose products from life insurance companies
Agents choosing to move on to FA platform will truly enjoy their new found freedom to choose whichever life insurance companies they like to place their business with. In FA system, advisers are not obliged to give business to an insurer if their products and services are poor and not competitive.
The stressful days of rushing to close sales just to fulfill the sales quote during ‘closing month’ are over. And the unhealthy sales practice of just asking clients or friends to help buy new policies just to achieve agents sales quota can be avoided.
Insurance buying public will be more receptive and feel more comfortable when dealing with FA representatives knowing that our hands are not tied by sales quota from any life insurer.
Conclusion
The conclusion is obvious. When agents choose FA platform to build their business future, they can be sure that many of the restrictions inherent in agency system can be avoided. Energy can then be better utilized to better understand the clients and to design customised solutions for them.
