Why is the banks selling insurance company policy or endowment plans?

1. Bank earns fees for selling insurance/endowment plans
2. Some customers have enquire why banks do not provide such financial needs, hence the bank onboard such products

Banks are businesses. They sell financial products because it helps them generate revenue. That being said, endowments are insurance linked plans are generally a good for several things: guarding capital against inflation, fairly low risk, helps save money and a no brainer approach to ensure you allocate a certain amount into wealth growth each year.

Hi anon,

​

I'll keep it simple (somewhat). And this is an opinion, other people may have differing experiences.

​

Banks will always know how much cash you have with them. If you have significant deposits, you'll be typically assigned a relationship manager. This RM will be able to see details about you as well as your holdings with the bank. And having more avenues to sell always results in higher revenue for the insurer. They are for profit companies after all.

​

Now, we know the often used cliche "You must make your money work harder". 1 Which I don't deny, that's true, it's just how you wish to go about doing it. Some folks are extemely risk adverse by nature and stick to FDs and such, which is probably the market that RMs are looking at. (Disclaimer: Never worked as a RM before, have always been with Phillip, I'm just taking a stab in the dark. Could be wrong)

​

This is when you might get a call from the RM for a discussion, the methods by which you are asked to go down vary widely and I better not talk about it too much here but suffice to say that they need you to sit in front of them (think captive audience)

​

Now ultimately once you are in front of them, the most straight forward way to sell is to ensure that you understand 1 above, and a step up from FDs are those endowments and such, because the concept is simple and there is NO medical underwriting; it is thus the easiest plan to sell. Try asking to buy a hospitalization plan and see what happens :)

​

Having said that, it may very well be that such plans do suit some people, so there's nothing wrong in that. But I always say that one should compare across multiple insurers when it comes to a particular type of plan, so that you get the best deal for your money, unfortunately, this is where banks probably fall short because most of their distribution agreements are exclusive. You won't see DBS carry a Prudential product. Same for OCBC. But Standard Chartered and UOB will have Pru products.

​

But then you ask, are the fees and benefits the same? The answer is YES. The quotation engine is exactly the same for the same plan even if you got the quote from elsewhere. The only difference is that there may be plans that are exclusive to the bank distribution channel, in which case no one can offer it.

​

And why are they dangling benefits such as boosted interest rates (think DBS multiplier/OCBC 360) and vouchers in front of you? Simple: Humans generally succumb to short term greed. That's really unfortunate, because I have had quite a few people share their stories with me before that they regret their endowment/retirement purchase with the bank because it turned out to be either unsustainable or excessive in terms of premiums. (Take home of $2700/mth and having a premium of $800/mth for 25 years is NOT sustainable. And that is just the tip of the iceberg in terms of what I've seen over the years)

​

Bank RMs have a KPI probably tied to premium amounts, and it is human nature to spend as little as possible on insurance ('because I can't see the benefits') and divert as much as possible to 'secure your retirement by making your money work harder'.

​

Sounded like a rant, sorry. I just wanted to lay things out once and for all. Have I said too much? Oops.

It's a partnership. Ocbc partner with great Eastern and UOB partners with prudential. So it's a win win as it broadens the bank's scope of services.

​

They have their own contractual agreements but I heard from my financial advisor friends that their life is way better in the banks as the clientele is way broader and it's more sustainable as compared to sourcing for leads by themselves.