Archive for January 10th, 2010

Sunday, January 10th, 2010

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Sunday, January 10th, 2010

Customer Advisory Against Prudential Agents

I’m not sure how many of you are on Prudential insurances but I’ve had two pretty bad experiences with them and unfortunately I still stupidly bit the bait. This is a post to prevent any of our BolehVPN customers from getting into this mess, or at least be aware of what they are getting into. I am not sure how this reflects Prudential agents as a whole but hopefully some of you can learn from my experience.

This plan is in relation with a PRUlink Assurance Plan, PruSaver, Accidental Death and Disablement, Crisis Shield, Accident Medical Reimbursement, PRU disability provider. PRUhealth, PRUmed, Enhanced PRUpayor Basic, Enhanced PRUpayor PSA and a weekly indemnity. This totals up to be a commitment of RM300.00 a month.

For those who are lazy to read and which may seem self evident but:

1) Do not subscribe to an insurance plan you don’t totally understand.

2) Don’t take your agent’s word for it, read the policy, and if you don’t understand it, don’t take up on it.

3) Be sure your plans are TOTALLY transparent without the need for you to check through your agent.

4) Keep investment as investment and insurance as insurance. Don’t mix them up.

Agent #1

Approached me and told me in no uncertain terms that I will be getting insurance benefits, I can get out at ANY TIME with no penalties and on top of that I will be getting 8% GUARANTEED on top of the money I put in due to investment. This sounded too good to be true and I told her that and yet she was still insistent that this was the case. I asked her to provide the policy terms, and she never got back to me so I stopped there and didn’t take up any insurance.

Agent #2

A year later, another agent approached me. I told her that I was familiar with the plan but I rejected it in the past due to the misrepresentation of the agent. She told me she was different and would make sure she explained everything to me. She then told me that a huge proportion of the 1st and 2nd year of the payments will go towards Administration Fees and Service Charges, but after that, my entire contribution each month would go towards my cash value.

As I saw how they could make money this time (the administration fee + the fact that they were holding on to my money) it made sense and hence I signed up. When I asked how much exactly the administration fee would be, I was told that she could not determine it straight away as each customer was unique and could only be confirmed later on. At this time alarm bells should be ringing, but I told her ok, please let me know as soon as possible. It didn’t help that she was also rather attractive. Men are weak. I also stupidly agreed to pay one year in advance to help her reach her target when she very nicely asked me (yes, stupid me). Apparently, she’s also the top seller in her region so I thought I could place my trust in her.

After trying to get these figures for a few months (the agent who was previously so available during the sales period was suddenly a lot more difficult to reach), I told her that I really wanted to know my administration fee and arranged a meeting with her. Prior to this meeting, I talked to another Prudential agent friend who told me that these admin fees should actually be in my policy and that the break even point was after SIX YEARS and not TWO YEARS as she represented. I quickly whipped up my neglected policy book and sat down to make sense of the rows and rows of charts…I then realized the meaning of these charts…

Basically, out of RM300.00 a month, RM220 goes into insurance + investment and then RM80.00 goes into a PRUSaver investment.

However from the RM220.00 portion, on the 1st year, 60% gets eaten up by service charges, then 50% in the 2nd year, 40% in the 3rd, 30% in the 4th, 10% for the 5th and 6th and only on the 7th year do you actually break even after which you’ve already been bled dry.

In real terms, out of RM300.00, for the first year, I only got back RM88 for the insurance portion and RM76.00 (not including any appreciation) for the investment. This totals up to about half of my insurance value disappearing. Out of the RM3600.00 I put in each year,  I get only RM1,968 in the first year, RM2,232 in the 2nd year and which continues on. I do appreciate that I’m getting about some protection but if I die, I get something in the region of RM100,000 which to me is not a significant amount considering the amout of money I”m pumping in each year.

Even for the RM80.00 portion, which is NOT guaranteed and is basically a unit trust, 5% of it also gets eaten up by ‘service charge’.

During the meeting with my agent, I told her that I wanted a re-explanation of the administration fees as she had not gotten back to me on it. I wanted to give her an opportunity to see if she could explain herself out of it before revealing what I had read. She then drew up a chart for me, which indicated that after 4 years, there would be no more admin fees. After she had completed her explanation, I told her that I had read the policy and it said 6 years. I also reminded her that when she was selling it to me I distinctly remembered 2 years being the ‘break even’ point. She told me ‘Oh, maybe this policy has been customized to you.’ I decided to keep my cool so that I could go home and recheck the policy again which confirmed my fears…I’ve been duped. I then asked her how was previous performance of the PRUSaver investment portion of the fund, I was not given an exact figure, instead I was told ‘it did well’ and that it would be difficult to check the price at which I bought the units for. I concluded the meeting on a good note, wanting to make sure I got my facts right before making any accusations.

I went back, sat down and thought about it and relooked at my policy and didn’t see how this could be anything else besides a misrepresentation. I gave my agent a ring and told her straight that I was very upset and that I felt cheated and I wanted to terminate my policy. She said that her supervisor told her it was for 4 years and she would have to recheck this tomorrow with her supervisor. I told her that this was a HUGE mistake and that the difference between 2 years and 6 years is pretty big. A customer should be able to trust his agent and it’s the agent’s duty to ensure that the information she gives is accurate. Yes my bad for not reading through the 100 page policy but it was just unbelievable that it could be so blatant. I was naive.  She thanked me for bringing to her notice this fact and I wondered straight away how many of her other customers were under the same misconception. I’m still exploring options on how to redeem the most out of this situation but I have accepted that the payments I have made are probably irrecoverable sunk costs and consider it an expensive lesson.

There is no other way to check your ‘cash value’ besides getting it from your agent. The lack of transparency, combined with misrepresentation led me to have a very bitter taste in my mouth.

I also saw some increasing rates and service charges as you aged (which is expected but was also not explained to me) and I still can’t fully figure out and at this point in time I can’t be bothered to. I just want out.

So let me repeat!

1) Do not subscribe to an insurance policy you don’t totally understand.

2) Don’t take your agent’s word for it, read the policy, and if you don’t understand it, don’t take up on it.

3) Be sure your plans are TOTALLY transparent without the need for you to check through your agent.

4) Keep investment as investment and insurance as insurance.

A term life insurance with a pure charge every year is much easier since there is no messing with ‘investment’ and cash value and much easier to understand. After all, why give your money to an insurance agency to invest for you and let them take a guaranteed 5% off your money and then you getting the leftovers if they make money or not on their investments? Keep insurance as insurance and investment as investment.

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