A few weeks ago, a motivational talk of an insurance agent went viral, sparking debates on the legitimacy of the industry.

The clip, which lasted no longer than a minute, featured an extremely successful agent who has managed to rake in millions of ringgit through selling insurance alone.

“I have three kids who are all studying [or have studied] overseas. I spent RM800,000 for my daughter’s studies in the UK. It’s not a lot,” he said.

“Don’t underestimate the insurance industry. Every single cent I earned is through using my mouth alone.”

“I don’t understand why people still work for other industries. Why are you still doubting insurance!” he exclaimed.

Netizens were shocked after watching the video. Many people called insurance agents “legal scam artists” and the “snakes” of the society.

This has opened a huge divide between agents and citizens. I’ve received countless DMs from both sides of the coin, but most agree that the insurance industry is twisted. Even agents themselves question the motives of their own company:

The underlying issue here is that agents are pushed to meet their monthly KPIs and close sales with as many clients as possible. Most of them rarely do a proper background check of their customers before recommending products to them.

As a result, the premiums that citizens are paying for become very obfuscated with various costs, including medical, investment, life, etc. - the more the merrier.

Premiums these days are often wrapped with an Investment Linked Plan (ILP) and sold to unwary customers as a “retirement” solution, where in reality, the plans themselves charge extremely high fees and don’t even keep up with inflation.

They'll tell you that “it's important to have a separate basket to help you save for retirement apart from EPF,” or things like “when you're 70 you can withdraw RMxxx and go holiday.”

What can I do about this?

I scoured the internet and came up with 5 helpful guidelines that you can follow:

1. Medical coverage is enough if you have no dependents.

   Assuming your parents are fairly well to do and don’t need your income, you actually don’t need to subscribe to life insurance.
   RinggitPlus founder Hann Liew puts this perfectly: “If you die, no one [financially] cares.” 😂😂🥲

2. Spend not more than 5-10% of your monthly income on premiums.
   This is to ensure that you have sufficient room to budget your other expenses, such as rent, instalments for your car, groceries, and so on.

3. Take 2-4x of your annual income as your medical coverage.

   If your annual income is RM60,000, then you might want to look for a medical plan that covers up to RM240,000 annually.

   This is a highly debatable figure though, because it depends on how much you value yourself and your monthly budget.

4. RM200-300/day for room and board.

   Most hospitals in the Klang Valley are now charging somewhere around RM250 per day for room and board.

5. Opt for a cashless policy.

   This is to ensure that you can enter the hospital without paying a single cent, rather than you paying first, then the insurance company reimburses (which will take some time, and in some cases, you may not be able to claim).

More importantly, you should be buying insurance for protection, NOT INVESTMENT.

What options are there?

i) Decent coverage: Etiqa OneMedical https://edp.etiqa.com.my/life/onemedical/takaful/plan

• ~RM80-90 per month for a 28 y/o

• RM150,000 annual coverage

• RM360 for room and board

• Cashless admission

• No deductibles

ii) Basic coverage: FWD i-Med https://www.fwd.com.my/medical-insurance-takaful/i-med/#

• ~RM60-70 per month for a 28 y/o

• RM90,000 annual coverage

• RM250 room and board

• Cashless admission

• No deductibles

iii) Great coverage: AXA Affin SmartCare Optimum Plus https://fiselect.my/pdf/medical/PDS_SmartCare_Optimum_Plus_01072021.pdf

• ~RM80-90 per month for a 30 y/o

• RM1.1 million annual coverage

• RM180 room and board

• Cashless admission

• No deductibles

According to Hann Liew, RM1 million coverage is considered T10 level, and you can get it for only RM100-200 per month.

Remember the trend of people snapping pictures of EPF Accounts that are not necessarily theirs?

Yup, it’s back again.

Here are two similar posts from different accounts. Both of them are Unit Trust Agents from Kenanga Investment.

Both say that you can achieve RM1.3-1.5 mil in EPF by:

• Earning a salary of RM7-10k, or

• Investing in Unit Trusts with your Acc 1 (through the Unit Trust agent)

The posts stress the importance of investing to generate 8-10% returns, but they failed to bring up another crucial thing: RISK!

Using your Account 1 to invest in Unit Trusts will POTENTIALLY turbocharge your returns, but only if you know what you’re doing.

I’ve seen cases where people followed agents blindly, only to end up making a much bigger loss than just leaving the sum in EPF.

This is not saying that all Unit Trust Agents are bad.

But as a consumer, you should treat them as a salesperson and look at them with an unbiased perspective.

Better yet, learn to analyze the funds yourself. It’s really not that difficult.

i) Login to your EPF account through the i-Akaun website (desktop) and select “i-Invest”.

ii) Then select “Fund Tools” to search and filter for the best funds.

I typically filter for high volatility and consistent funds that have a good track record.

One thing to note about these funds: Past performance is not always an indicator to future returns. ⚠️

Some of the funds may also underperform in some years, which will potentially impact your returns.

A few more things:

• If you invest through EPF’s website, most of the funds have 0-0.5% sales charge, which is cheaper than buying them through an agent (3-5% charge).

• You can switch, sell, redeem your investments anytime. The balance will go back to your EPF account 1.

• The sum you invested will not be entitled to EPF's annual dividend. ⚠️

Login to your EPF Account here: https://iakaun.kwsp.gov.my/portal/member/login

If you don’t have the time to learn how to choose funds, look for a financial planner who’s not affiliated with any Unit Trust company and is not trying to sell you anything.

The other alternative is to focus on what you’re good at to increase your income, then let your EPF contributions compound itself.

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That’s all for this week’s newsletter!

Disclaimer: The information contained in this newsletter is for informational and educational purposes only. Nothing herein shall be construed to be financial, legal, or tax advice.