My experience with business insurance.
By Mr Tenzin Quek CLU, ChFC.
Excerpted from GE Life MDPC Newsflash Mar'96 issue,
reprinted in GE LifeForce August 97 issue

When I first came across the term "business insurance" I thought it was referring to general insurance since it includes any form of insurance (even Personal Accident) except life. I was excited when I realised it actually insures human lives as well except that this time it is for their business and company considerations instead of family protection.

Hungry for reference, I tried to speak to seasoned practitioners but their were few around. Even reference books in the university and our library were rare or non-existent. I was also wary of the methods presented in American materials because they may not be applicable to our local laws and practice. I simply could not risk the prospect of malpractice that could result in damage to my clients' interest. Notwithstanding a possible lawsuit against myself, it was also unprofessional.

I was grateful indeed when our company engaged Mr Neville Thomas to be our business insurance consultant. Without hesitation, I signed up his courses under his retainer program. I was then also competing fiercely with other companies on a case of sum assured more than $4 million on the 4 directors of a fast growing company. Thomas was to be my trump card especially when our premiums, though higher than the competition in relative terms, was very significant in absolute terms when it went up to five figures.

Thomas and I went no less than 10 times to their office to present our proposals over a period of more than one year. I believe it was an educational experience for my clients just as much as it was for me. Their needs fluctuated from buy-sell agreement, guarantor insurance, group keyman insurance and finally to personal keyman insurance. Personally I went through periods of sleepless nights not just because of the size of the policy alone but from the keen competition that we were facing other companies as well. Thomas was there to answer any queries ranging from the legal related matters to the corporate needs. For example, in Singapore a company cannot buy its own shares although it is allowed to in the USA in the case of the buy-sell agreement. Most guarantors are also not aware that they could have disinherited their immediate family from their estate even though their loan could be fully paid up. Issues on taxation of the proceeds from the life insurance claims of the keyman insurance were also discussed in detail. Of course the lawyer's advice (also under Thomas' reatiner) was sought on all legal matters beforehand.

There were time when it became particularly trying when one of the directors wanted to go ahead with our competitor's method because it was perceived to be easier to implement. I remember holding my breath when Thomas said he would withdraw his proposal rather than risk a future lawsuit on malpractice. Much as I respect Thomas' expertise on business insurance, what impressed me most was a valuable lesson he taught me on when to say no to your prospects. It took courage to give up a hard-fought case on the grounds of ethical practice; and this time we are not even talking about rebating. This was the toughest case I ever closed in my 4 years of business. Sweet indeed is the taste of success of a hard fought battle.

One unexpected spin-off was a large case I did on one of the directors on his estate planning even before the business insurance case was closed. The total annualised premium added for the business insurance and his personal case were in excess of $100,000. Under the retainer program with Thomas, a consultancy fee was paid to him as well. It was worth every cent. Without his assistance, the deal would never have gone through. What rally excites me was that we have only solved one of the many problems listed above for the company and opportunities abound for more business to come if our service meets their expectations and beyond.

I strongly encourage all agents to pay to learn and not hesitate in seeking expert advice when required. As the traditional life insurance market matures, business insurance could well be the "second wing of economic growth" as mentioned by SM Lee Kuan Yew when he encouraged entrepreneurs to venture overseas.

Patience and plenty of hard work are required in this advanced market but the fruits of labour are certainly rewarding. Continuous education is a necessity in the information age of today. By the time we have realised we have lagged behind, it would be too late. I believe this is true not just for the insurance industry but every other industry as well. We sell nothing but ideas and if we cease to add value to our clients' knowhow we become obsolete. So long as we are prepared to invest in learning and put it in practice, the future of this business is bright indeed. Happy Selling!

BUSINESS INSURANCE GUIDE

The following are some of the issues which the business owner may consider to enhance the life expectancy of his organisation and add value to his employer/ employee benefits :-

Plan	Objective	Key Benefits
Executive Bonus Plan	Retention of key selected employee by providing life insurance and retirement benefits	1. The employer pays deductible premiums for the employee without contributing another 16% CPF top-up as required under a pay increment. 2. The selected employee has an added incentive to stay with the company.
Group Life	Provide life insurance death benefit for employee's family	1. The employer provides low cost insurance coverage to employees with deductible premiums. 2. It improves overall employees morale.
Key Employee Life Insurance	Provide protection to offset financial losses to a business due to death of a valuable employee	1. It stabilizes the business and assure creditors. 2. Instant cash available to line and train a new person. 3. The accumulating cash value will serve as extra funds for expansion, enhance the credit standing of the business, supplement the key person's retirement plan, etc...
Disability Income for Key Employee	Provide salary continuation plan for selected employee during period of disability	1. Improves the morale of the key person. 2. It continues paying salaries and retires pressing obligations.
Split Dollar	Retention of key selected employee by helping him or her purchase life insurance at relatively low cost.	1. It enables the insured employee to carry permanent life insurance at less than term cost 2. No cost or risk to the employer who contributes to the premium payment i.e. he gets his money back guaranteed. 3. The employer can single out promising young employees and tie them to the business by offering them low cost insurance coverage.
Business Continuation	Cross Purchase Disposal of business interest upon death of an owner, by transferring ownership to surviving co-owners who continue business Share Purchase Insurance Trust Disposal of business interest upon death of an owner, by setting up a Trust for purchase of deceased's interest	1. No need to do business with the widow, children or executor of deceased shareholder. 2. Avoids the risk of unwelcome outsiders obtaining a control in the business. 3. It prevents a weakening of the business which would result from draining off cash or selling non-liquid assets. 4. It creates extra borrowing power for business emergencies or expansion.
Deferred Compensation	Retention of key executive by deferring taxable income and providing salary continuation	1. Help the employer to attract and retain a much needed executive. 2. Enable the employer to offer a deferred salary increase PLUS a substantial death benefit. 3. Provides the employee with a sizeable retirement income
Medical Expense and/or Major Medical	Provide basic and/or more extensive coverage for hospital, surgical, and other medical expenses incurred due to sickness or accident	1. It takes care of a situation very often worst than death should a prolonged disability occur.

(Omissions and exclusions excepted)

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