How I almost got conned into buying a "savings product" from an insurance agent

Writing this post after quite a debate on ILP on La Papillon's chatbox.

Back in late 2010, when I was fresh to the stock market and unused yet to the intricacies of finance, I was approached at Harborfront MRT by one of those people who asked me whether I'd have time to fill up a survey form. I did, and this was how the saga panned out.

The survey form has a few questions, some of which I could remember are:

1.) What is your monthly income?
Isaac's Selection: $500 to $1000 ( I was an NSF at that time)

2.) Which banks do you use?

Isaac's Selection: Citibank and POSB

3.) Are you aware that there are products out there with higher interest rates than what you can get in banks?

Isaac's Selection: No

At that point, the agent came out and did a sales pitch, briefly:
1.) We can offer you >3% (cue the :o face here) per annum! With just a minimum of $80 a month investment!
2.) We can let you take out $200 per annum ( :o again) after the first two years!

I then asked her what company was this from. I shall not reveal it here, suffice to say it is a big listed international insurance company.
I was pretty intrigued (didn't know about bonds, REITs and stuff back then) and decided to leave my cellphone number with her. It helped that she was willing to travel to near my army camp to discuss it further.

A week later, we did meet up near my camp, during my lunchtime. (which was 2 hours. I love the army)

She discussed it with me and mentioned there are 2 options. 15 year and 25 year redemption period. I was pretty shocked, for the time period was extremely long. She also did up one of those computerised quotes for me.

The gist of it was:
-I was to pay them $78 a month, for the next 25 years. Total of $23,400
-There will be death cover of $25,000 and some minor illness cover, of which i was to pay $3 a month. (The investment portion was thus $75 a month).

-ASSUMING I was to NOT take any cash out from this policy for the next 25 years, my payout was to be about $28,000 to $30,000 in the year 2035.

-There might be some increase in payout ratio if they had a good year.

-Essentially, my best case scenario was to get back $31,000 in 2025, worst case $28,000. Now, what is the compounded interest for that? Roughly but less than 2%!

Hey! I thought I was promised 3% at the MRT station?

Taking a closer look at the policy, the amount used to pay for the administrative charges and commissions was a whopping $1,500! :o face from me now!

That's over 6% of the total policy injection into the agent's pocket!

And she didn't even buy coffee for me! (She bought for herself!)

I emailed her back and mentioned that I would not be taking up the policy for it provided me with useless coverage ($25,000 compared with the $400,000 I have now from SAF Aviva and the compulsory $25,000 from CPF and another $100,000 term insurance my parents bought) and poor returns.

She was very persistent and reminded me that this policy "beri good wans...give you protection and investment leh! Pruss so cheap leh! $78 a month nia! "

Erm...I thought you pitched this as a pure investment policy?

When I replied that SGS Bonds gave about the same yield(my father told me) , she mumbled something about the risk involved with equities!



Lesson Learnt: Do you own due diligence!