Pay by GIRO to reduce the handling cost

A policyholder is angry about having to pay a fee of 1.2% to pay through credit card. Here is his letter (edited) and my reply.

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Dear Mr Tan,

I refer to the above NTUC policy which my mother bought for me 16 years ago.

I received a letter from your office recently, reminding me of the payment via GIRO deduction.

I called your office to request to pay by credit card. I got this reply:

1. From 1 May 2006, we will allow payment for premium up to $300 by credit card. This is applicable to all products which are on yearly mode.

2. For payment in excess of $300, we will charge 1.2% to the policyholder.

3. If the policyholder does not wish to bear this charge, we will ask the policyholder to pay by GIRO, NETS, internet banking or cheque.

My questions to you are:

1. Why are you imposing a 1.2% handling fee when this is not standard industry practice?

2. Do you actually have premium policies, which are equal or less than S$300 per year? (Which is precluded from paying this handling fee?)


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Dear

Our aim is to encourage policyholders to pay by GIRO as the cost of collection is lower.

I estimate that we have to collect $500 million in life insurance premium in each year. If all the policyholders insist on paying by credit card, we have to incur 1.5% on the credit card charge. This will amount to $7.5 million.

I hope that you will realise why we are reluctant to incur this potential cost.

We have many travel, accident and home insurance policies payable by annual premium less than $300.

In your case, we have to pay a fee of $15 to the bank to receive your premium of $1,000 by credit card. We want to avoid this wasteful expense. If you send us a cheque, it will cost us $2 to process it.