Insurance companies are one of the largest undercover MLM company that has existed in the history of the financial world.
"Give me $100 every month and I'll make sure you have a happy retirement"
Structure of a typical MLM company:
1.A company that provides the product and back-end support for its promoters
2.Promoters who promotes the company's products and are rewarded through commission
3.Customers who are encouraged to constantly input money into the company in exchange for the benefits that the products purchased promised
4.Generates significant amount of income for its active promoters and rewards leaders who "groomed" successful new comers
5.Hierarchical in nature
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Now look at insurance companies.
AIG, AIA, MANULIFE, PRUDENTIAL, GREAT EASTERN are names of insurance companies that we often hear.
http://en.wikipedia.org/wiki/List_of_insurance_companies_in_Singapore
Go to the link to see more insurance companies.
So like the multitudinous MLM companies around the world, we have our first similarity.
Insurance companies provide insurance agents the different policies or products for clients to choose from.
Next is the insurance agent.
From what I understand, to become an insurance agent, you need a certification. Which means you need to sit for exams. And unless the company you work for sponsors your fees, you'll have to pay.
Disclaimers: I am not an insurance agent and I have not worked as an insurance agent before in my entire life.
Insurance agents in MLM context are people who independently represent the company. They are allowed to promote the company's insurance policy to earn a commission.
~Insurance agents recently changed their title to financial planner. Reason being, people started to evacuate a room faster when they realise you are an insurance agent compared to a real fire emergency.
Most financial planners are poor. This is the 80/20 principle. They are enticed into the insurance industry. By what?
The commissions and passive income. Does it sound like MLM?
Most of them have no clue what to do their own money. All they are trained to do: sell as many insurance policies as possible to as many people as possible so that a passive income could be earned to secure their own retirement.
Do they know where the money in the insurance go or come from? Mostly into their pockets and from future buyers of insurance. Check out the link below to see how much your agent earns from you.
http://personalinsure.about.com/od/life/f/lifefaq3.htm
So insurance agents do earn a chunk of their client's money.
Next is what MLM would call "repeated sales".
Insurance companies does it in a much subtle and much more efficient way.
Customers have to pay a fixed sum every month. In exchange for?
A piece of paper.
Or maybe a few page of documentation.
Depending on the type of insurance, customers may or may not get back their premium.
And for those that does, it is usually after 5 or 10 to 20 years later.
Even when customers got back their premium after the insurance matured, most customers would not know what to do with the large sum of money they suddenly received.
So what would the kind-hearted and caring agent do?
Introduce another insurance policy.
The money is reinvested and most of in goes into the agent's pockets.
Next is the training of new people so that what they earn is what you earn.
Common sense tells you that there are different positions one can aim for in an insurance company.
To attain the positions, one has to perform to meet the criteria.
To become manager, does it make sense to say that you need to have the people to manage?
So what is in it for you to manage them?
A part of what your people earn, goes to you. In return, you provide those people with training and advice.
Very identical to MLM. Gold direct, diamond ambassador... BLAHHH Blahhh blah...
Very clearly, insurance companie are multi-leveled marketing companies in nature.
But what's the conclusion? Read on to find out.
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Some behind the scene ugly truth about the insurance industry. Don't ask me how I got them, read them and see if they make sense.
Insurance is a very very big money game.
What is a money game?
A money game is when a group of people input money into a pool and gets a larger sum out of it after a certain period of time.
Some call it investment, but it is not an investment when the money comes from those who input money later.
Meaning, the money that the first batch of people are collecting comes from the second batch of people who will get their money from the third and fourth batch.
Incidentally, there would be disputes to the above claim.
Claims like: the money is from investment returns in government bonds or low risk share investments and so forth.
But logically speaking, if there are really such safe and low risk investments that can generate that kind of money consistently for your money every single year for over 20 years, the words poverty and crisis would be non-existent.
Then, the dissident voices would say: that's why the returns fluctuate.
But mistake not my point, I'm not referring to inconsistent low returns, I'm referring to the unforeseen Negative returns.
An insurance company cannot do what mutual funds and unit trust managers do. When insurance company make a lose in the investment, they cannot call their clients and say that they made a lost, sorry, but this is what's left.
Investment companies have to return at least the entire input-ed premium. If not, its reputation is ruined and its money game collapse.
Let's not forget the high amount of commission our dear agents receive from each policy. Check it out if you didn't.
So can the insurance company really afford to make low return investments?
And if the company ran out of luck and lost a portion of the investment?
What's the easiest solution?
I'm sure a 5th grader can tell you.
Most of the first generation insurance buyers had not seen their investment returns. They rolled(reinvested) it because they are still alive and kicking.
So the question asked here is this, when nobody ever takes out the money until they really need it, does it mean that the insurance company will be able to afford paying each and every customer when they all decided to withdraw their money?
No.
And when the company is not able to return every customer their matured premium, is it a money game where there really is a pool of congregated sum of money with overlapping ownership?
Let's just say that the circumstance of all insured customer withdrawing their premium will never happen.
But at one point or another, these people will still take out their money.
The number of first batch of customer is a smaller group compared to today's batch of customer.
When the numbers withdrawn are supported by a larger pool of customers waiting for their premiums to mature, there would not be any sign of rupture.
But imagine 20 years down the road when today's batch of customers started to take out their premium.
With shrinking population and ever increasing number of new insurance companies, will there be enough money to support the withdrawal?
Relate this to the collapse of AIG.
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What is being shared here is not only the similarities between insurance companies and MLM companies.
What is being shared here is the message that everything in the finance world works almost identically.
Look at banks. Replace insurance agents with bankers.
Look at collapse of Lehman Brothers.
What is safe?
MLM is a money game. Bank is a money game. Insurance is a money game. The currency IS a money game.
Under your mattress on a tree top house in the middle of Amazon forest is the safest.
The ugly truth is this, you are already a victim to the money game.
At least MLM is honest enough to tell you.
