The Sequis Difference (part 3)

12 May

If you live in Jakarta, almost in every major bank now you will find a small table selling insurance product. They are not part of the bank itself, they are just working together with the bank to get more customer for the insurance company and more commission income for the bank.

Most of them are selling unit link products. You can add any additional protection on that basic product such as health protection, etc. But what appeal to me lately is the way they promote their product by mentioning about the difference in costs, especially acquisition cost.

Acquisition cost is a cost that is acquired by the insurance company to cover all of their initial cost such as agent commission, administration , issuing a policy, etc. In addition to acquisition cost, there is also a monthly admin fee, investment fee, policy maintenance fee, monthly insurance cost, etc. See, there are so many cost involved when you buy a unit link product. But then, it is cost versus benefit they say, especially if you can not manage your own money. Let you focus on your job, let the experts manage your money and you pay them a fee. Fair enough.

Now, I just got some new proposals, created in May 2014, from Tokio Marine, AIA and Sequis Life. Let us do some comparison summary. I will only compare the basic product and all the wordings are all clearly written in the proposals.

The proposals I have on my hand right now are : TM Maximum Investment Plan from Tokio Marine Life Insurance Indonesia, Maxi Health from PT.AIA Financial and SequislinQ Value Protector from Sequis Life.

Some of the Basic Program Differences :

1. Basic Program Coverage

a. Sequislife : Life coverage until 80 years old. Death benefit 100% sum insured + additional 150% sum insured if death caused by accident before 60 years old.

b. Tokio Marine : Life coverage until 99 years old. Death benefit 100% sum insured.

c. AIA : Life coverage until 99 years old. Death benefit 100% sum insured + additional 100% sum insured if death caused by accident before 70 years old; maximum additional benefit due to accident is 150 million rupiahs for age below 18 yo, 500 million rupiahs for age between 18 to 70 yo.

2. Loyalty Bonus

a. Sequislife : Bonus 1% (1 percent) from regular premium, paid out from Year 6 onwards until the end of premium payment period. With condition the policy age is more than 60 months, no withdrawals, no missed out premium payment.

b. Tokio Marine : Bonus on Year 6 – 10% (ten percent), Year 8 – 10% (ten percent), Year 10 – 10% (ten percent) from regular premium. With condition assuming the premium is paid every year (including the bonus year if you want to get the bonus).

c. AIA : Bonus on Year 10 – 15% (fifteen percent), Year 11 – 25% (twenty five percent), Year 12 – 35% (thirty five percent) from regular premium. With condition you have paid the premium for year 10 and/or year 11 and/or year 12 ;and if the accumulated sum of withdrawal is no more than 2 times the annual regular premium.

3. Acquisition Cost

a. Sequislife : For regular premium 0% (zero percent) all the way and for regular top up 5% (five percent) all the way. Top up is not compulsory.

b. Tokio Marine : For regular premium, Year 1 – 40% (forty percent), Year 2 onwards 0% (zero percent) and for regular top up 5% (five percent) all the way.Top up is not compulsory.

c. AIA : For regular premium, Year 1 – 70% (seventy percent), Year 2 onwards 0% (zero percent) and for any top up 3% (three percent) per transaction. Top up is not compulsory.

4. Investment Cost

a. Sequislife : 0,75% for Rupiah Cash Fund, 1,25% for Rupiah Stable Fund, and 1,50% for Rupiah Equity Fund, Rupiah Managed Fund & Rupiah Syariah Balanced Fund. Investment Fund Managed by Schroders.

b. Tokio Marine : Maximum 2% per year, depend on the type of investment chosen. Investment Fund Managed by various fund managers.

c. AIA : Maximum 2,5% per year, depend on the type of investment chosen. Investment Fund Managed by AIA Financial.

5. Administration Cost

a. Sequislife : Rp.40.000,00/month.

b. Tokio Marine : Rp.55.000,00 or USD$5.50/month for the first 10 years, afterwards Rp.27.500,00 or USD$2.80/month onwards.

c. AIA : Rp.27.500,00/month for the first 10 years, afterwards Rp.15.000,00/month onwards.

6. Policy Maintenance Cost

a. Sequislife : 0.45% per month from the regular premium cash value for the first 72 months, 0% afterwards.

b. Tokio Marine : 4.50% per year from the regular premium accumulated investment value for the first 84 months.

c. AIA : 3.50% per year from the basic regular premium account value for the first 7 policy years.

7. Insurance Cost

a. Sequislife : Insurance and rider cost will be charged accordingly looking at the age and sum insured.

b. Tokio Marine : Insurance cost will be charged monthly. Any riders will be charged from the Top Up Investment Value for the first 84 months; starting from the 85th month, cost will be deducted from the Regular Premium Investment Value.

c. AIA : Insurance cost depends on the age and sum insured. Cost will be deducted from the Top Up account if not sufficient then deducted from the Basic Regular Premium account.

8. Premium Holiday Fee

a. Sequislife : On the first 5 years, if there is any premium holiday, the regular premium amount owed will be deducted from the Unscheduled Top Up Investment Value. If not enough then the mode of payment of annual regular premium will be changed into monthly payment.The monthly regular premium amount owed will be deducted from the Unscheduled Top Up Investment Value.

If there is no unscheduled top up payment or the unscheduled top up payment value is not sufficient, then the client will be charged 1% monthly from the regular premium accumulated investment value and by the end of the 12 months, the policy will lapse.

b. Tokio Marine : Premium holiday is not allowed on the first 3 years. If there is a premium holiday exist before the first 3 years, then the investment value will be paid out based on the Redeemable Value then Policy become inactive.

After the first 3 years, Premium Holiday fee will be charged from the regular premium accumulated investment value, as a percentage from the total monthly cost which include Admin cost, Insurance cost and Policy Maintenance cost. Premium Holiday Fee on Year 4 – 60%, Year 5 – 60%, Year 6 onwards 0% (zero percent).

c. AIA : Automatic premium holiday fee will be charged if there is a premium holiday on Policy Year 6 and Year 7; with amount 5% to 10% from the basic regular premium account value.

For the first 7 years if the regular premium is not paid in full even after the grace period, then the regular premium owed will be deducted from the Top Up account value (if there is any), thru automatic premium payment facility.

For the first 5 years, if the Top Up account value is not enough to cover the regular premium owed then the policy will lapse.

If the policy has entered its 6th year and the regular premium scheduled has not been paid in full even after the grace period has passed and the top up value is not enough to pay the premium then the automatic premium holiday fee will prevail. During this period, all costs will be charged as usual from the account value. If it become insufficient then the policy will lapse.

9. The Redeemable Value when Policy Lapsed or Cancelled

a. Sequislife : The redeemable value at Year 1 – 10%, Year 2 – 25%, Year 3 – 40%, Year 4 – 55%, Year 5 – 70%, Year 6 – 85%, Year 7 onwards – 100%. All calculated from the regular premium cash value.

b. Tokio Marine : The redeemable value at Year 1 – 30%, Year 2 – 45%, Year 3 – 55%, Year 4 – 65%, Year 5 – 75%, Year 6 onwards – 100%. All calculated from the regular premium accumulated investment value.

c. AIA : The redeemable value at Year 1 – 5%, Year 2 – 10%, Year 3 – 30%, Year 4 – 50%, Year 5 – 70%, Year 6 – 90%, Year 7 – 95%, Year 8 onwards – 100%. All calculated from the basic regular premium account value.

In summary, when you look at a proposal, some agent will point out the loyalty bonuses you get, some will point out the once only acquisition cost. But frankly, when you calculated the loyalty bonus with the acquisition cost, i personally don’t think there is a bonus at all. It still your money which they took at the beginning and return it to us at a later point.

I hope by reading this, you diligent readers can have a better information, be able to see the good and not so good side of each product, then make a decision for yourself. Be a smart buyer.

Last but not least, a quote for the day is from Frank Zappa : ” A mind is like a parachute. It doesn’t work if it is not open.”

Steviani, CPA, CFP®.

Advertisements

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: