My customer bought a Great Eastern policy "Great Cash Wonder" in December last year. He bought it from a lady agent after she kept calling him, begging him to buy the policy so that she could hit her annual target for a trip.
The premium is RM13,100 annually, paid for 5 years, and matured in 20 years. Sum assured is RM25,000. Starting from first year, he will receive cash payment of 5% of sum insured, and on the 6th year until 20th year, 6% of the sum assured. Maturity benefit of guaranteed plus non-guaranteed is RM100K to RM140K.
After one year, he asked me to see whether it is worthwhile to keep the policy before he decides whether he should pay for the second premium. On replying my question of why he took the policy, he said the lady agent told him that the returns of this policy is very good. Of course, he was also kind enough to help her to achieve her sales target for a trip.
Using Excel spreadsheet to calculate, it is easy to make comparison. Assuming putting the same amount in Fixed Deposit, or Bond Fund, or managed fund, the returns is well above "Great Cash Wonder". Besides, when we "save" through an insurance policy, our money is locked for 20 years. I would say it is not a good way of saving money! In fact, the return is about 4%, which can't even break even with the inflation rate.
Why would consumers commit in such policies when they can make comparison so easily? This puzzles me. Perhaps the agents have good selling skills, perhaps they are good at twisting facts, or perhaps consumers makes decision irrationally.
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