For the past 4 weeks, I encountered numerous cases who claim to have been cheated but in reality it is actually due to their own lack of effort to conduct basic research. The most common complains were:

1. They were sold regular premium ILPs but the agent did not disclose to them that their cost of insurance will become EXTREMELY ASTRONOMICALLY high when they are old. When they show me their policy documents and the benefit illustrations, I showed them that the charges were disclosed in the documents. They were shocked to learn of the super high charges at older age and that the fact that it was disclosed right from the onset. In such a case, there is no cheating because of full disclosure. In reality, they made the wrong choice because they did not read the documents and did not do basic research. If they knew of the high charges, they would not buy it.

2. Some of them bought large amount of endowment and anticipated endowment. They asked me whether is it good. So they showed me the benefit illustration. I pointed out to them that they can lost 20-30% of their capital at maturity. They were shocked. But actually this was disclosed in the documents too. Apparently their agents circled the “projected maturity value” which appears to be high in value. But I pointed out to them that the guaranteed value is much less than the total premium. Again, all facts were disclosed but they did not read it. So this is not cheating. They told me that if they knew they can lose money in endowment, they will never buy it.

3. Some of them have major pre-existing illnesses. So when they apply for medical insurance they got rejected. When they came to me, I told them that I cannot do anything for them because they got rejected already. If they did not apply (and hence have no rejection), I can help them get cover for non pre-existing illnesses. They told me that if their agent had told them the risk, they would not have applied the insurance previously. But what happened was that they approached a tied-agent who could only sell one product. Again, there is no cheating here because the agent could only sell one product and has neither the legal nor ethical obligation to disclose that there are better alternatives. Some clients approach IFA but their IFA did not offer them a safer way of getting medical insurance for those with pre-existing illness. As a result, the client cannot get a single medical insurance. Again, there is no cheating here because the IFA they approached were products peddlers. Product peddlers have no ethical nor legal obligations to solve clients’ problems because product peddlers’ main objective is to maximized profits (for the adviser, not client).

4. A common problem is they bought a whole life that is 20% to 40% more expensive than market average. Again, they felt cheated upon discovering it. But actually the reason is also due to seeking a tied-agent who has no obligation to disclose that there are better alternatives. Again, the fault is due to the client not doing some basic research.

In all the above, the poor choice of the products were due to the clients’ fault in not employing some basic research. There is no need to be expert in the field to do some basic research. When I buy a camera, I would look at advertisements and product features and if possible internet reviews. Then I would talk to a few salespersons and finally zoom in to one camera to buy. Being a non-expert, it will be impossible to get the best camera at the lowest cost. But the idea is to avoid buying the worst camera and the highest cost.

Apparently many people end up buying the worst insurance at the highest cost. So this is really quite sad.

So, what can you do if you have already bought the worst insurance at the highest cost? In all cases, the bulk of the cost occurs in the first few years. So if you have held on to the insurance for sometime, it is best to hold on to it because you have already paid a sunk cost. If you have just bought it and it is still within the 14 days, you can exercise the free look and you can get back your premium less any medical expenses (and losses due to market movement if there is an investment element). If you are sub-standard case (i.e. now with pre-existing illness), you must hold on to your insurance regardless of how expensive it is because you have no more bargaining power to make any future decision.

Many of my clients in the above categories were angry and furious to have been “cheated” but later on felt demoralized that actually they were 99% responsible for their own wrong decision. May I request to all that if you have learn such a lesson, do not let it go to waste. Pay forward by telling others to avoid the same mistakes as yourself. Do not think about yourself, think of the many lives you can save by telling others of your experience.