Saturday, October 14, 2006

Exchange traded fund

What is the difference between an Exchange Traded Fund (ETF) and an indexed fund?

A ETF is a fund that is managed to follow an index. The fund can be traded through the exchange. You can buy and sell the fund at any time during the trading day. The price is based on willing buyer, willing seller. It should follow quite closely to the value of the underlying assets.

An indexed fund is NOT traded through the exchange. If you wish to buy or sell units of the fund, you have to accept the price that is fixed by the manager at the end of the trading day. It will be based on the value of the underlying assets (based on the closing price).

Most of the investment-lined funds (ILPs) and unit trusts are NOT traded on the exchange.

For long term investors, it is better to invest in a non-traded fund. If you want to do short term or intra-day trading, a ETF is more suitable.

My personal website

If you wish to know about my personal plans after leaving NTUC Income, visit my personal website,

Friday, October 13, 2006

A new way to get insurance service

Some customers are well served by their insurance advisers who take care of their needs over many years. They enjoy the personal service, advice and attention of the adviser.

Some customers are not so fortunate. Their adviser drops out of the business, and decide to do other types of work. This applies not only to NTUC Income, but to other insurance companies as well.

In fact, the turnover rate of insurance advisers has been quite high over the years, especially among the younger advisers.

NTUC Income offers a new option to our customers.

- You can come to our business center and be served by our salaried consultant
- You can get service from our 24 hour contact center.

You are not tied to a specific adviser. You will be served by our organisation according to our service standard.

More people find this option to tbe quite attractive.

Poor follow up by insurance agent

Mr Tan

Many thanks for your birthday greetings.

I have visited your blog after reading the press reports. It is an informative and interesting blog.

Would like to share with you on my experience with your agent that is serving me. He was assigned to me after the initial agent that served me left your organisation. I took several policies with NTUC since 1991 but have not received any form of contact from this agent.

Quite some time ago, I contacted him when I have some queries on the claim forms. He did not help much other than suggested I called the company. I am very disappointed at him.

Not long ago, I bought two policies from a Prudential agent at Standard Chartered Bank, which is a total stranger to me.

I have also seen your Talk at TV program. I appreciate your HARD WORK, GREAT EFFORT in making Insurance more COMPREHENSIVE via TV program .

I hope all your agents appreciate your GREAT WORK and they must work harder not to let your effort goes down to other agency. Hope you keep me posted when you no longer at NTUC.



Dear RW,

Thank you for your feedback. I am sorry that the service from the agent has been disappointing.

I will ask X to contact you and see if he can be of any help in your insurance matters. Alternatively, you can visit our business center at 75 Bras Basah Road and talk to our salaried insuranced consulant.

Tan Kin Lian

Thursday, October 12, 2006

Easy for workshop to make a third party claim

12 October 2006

Forum Page
Straits Times

I refer to the report entitled "Fake road collisions: Income to go after workshops (St Times 12 October 2006).

The Motor Workshop Association's representative, Mr. Joey Lim said that the outcome of the recent court case would allow insurers to put the squeeze on workshop operators. The small workshops would be reluctant to hire a lawyer and would be forced to settle for a smaller amount offered by the insurer.

I wish to refute this statement.

It is easy for a third party workshop to submit their claim directly with NTUC Income. They can send the vehicle to an Idac center for assessment of the damages. We will make a fair offer of the repair cost based on the benchmark price obtained from our Motor Repair Cost System. This has produced a repair cost that is similar to what is estimated by our quality workshop. It contains a satisfactory profit margin for the repairer. After the repair has been completed, we pay the bill within four days.

We will only take legal action against a workshop that refuses to make a direct settlement with us, inflate the repair bill and get a lawyer to submit the claim. It is our duty to avoid paying an inflated repair bill. We want to act vigilently against inflated claims, so as to reduce the premium rate payable by our customers.

Each year, we handle about 10,000 repair jobs for our customers. About 94% of the repairs are arranged by us and carried out at our quality workshops. Only 6% of our customers opt for their own workshop to carry out the repair at the same price as our quality workshop.

NTUC Income wish to help the smaller workshops to operate efficiently and survive in this competitive market. A total of 130 workshops now operate under five business fusion groups to tender for the repair jobs of our customers. They are able to meet our quality standards and to offer a competitive price. As their cost of operation is lower than the larger workshops, they can enjoy a satisfactory profit margin. They also enjoy free and convenient access to these repair jobs.

About 30% of our repairs jobs are now awarded to the smaller workshops under the business fusion groups. Our customers give a high satisfaction rating to their service quality and standard of repair.

Tan Kin Lian
Chief Executive Officer
NTUC Income

Choose an insurer based on its actual return to policyholders

Forum Page
Straits Times

I refer to the letter from Ms Ong Hwee Leng entitled "Poor bonuses - time insurers revise premiums" (St Times, 11 Oct 2006).

Ms Ong said that the bonuses declared on her policies have been at least 30 percent below the projections at the time of her purchase. She probably bought her policies from another insurer, not NTUC Income.

If she had bought a 20 year endowment policy from NTUC Income in 1996, the actual reduction in bonuses is about 10%. This is largely contributed by a decline in the yield on fixed income investments, which account for a large proportion of the investments of the life insurance fund.

Our policyholders see a smaller reduction in bonuses for the following reasons:

- our initial projection was more realistic
- they were based on a rate of bonus that could be supported by the prevailing investment yield

We were able to offer a fairly attractive return to our policyholders due to our low expense ratio. We pay commission to agents that are much lower than the market and distribute a modest rate of dividend to shareholders. We are able to give more of the investment gains to our policyholders.

For maturing policies, we have consistently given a much better payout to our policyholders, averaging about 15% for a 20 year endowment policy. This is largely contributed by our low expense ratio.

My advice to consumers is to choose your insurer based on its track record of giving a actual better return to its policyholders, rather than on projected values or the sales presentation by its agents.

The actual returns from NTUC Income are posted in our website,

Tan Kin Lian
Chief Executive Officer
NTUC Income

Wednesday, October 11, 2006

Consultant gives fair and objective advice

Dear Mr Tan

As suggested by you, I met your product specialist on my financial planning matters.
He is Mr AJ from the Business Centre. I had a good 2 hours chat with him.

What I like about the service is that

- He is fair and objective
- He is not pushy
- He was able to tell me the pros and cons of your competitors product
- He was able to recommend products that meet my needs
- He was able to explain details clearly
- I am left in no doubts about my own financial position

I think the culture you have set for INCOME is good - one where customers are not felt pressurized to purchase a product because of pushy salesman but because the customer feel that the product serve his needs

I also like the transparency that you have set for the industry.

I am still deciding which of the products to purchase, but I know at the end of the day, I have make a right choice because I have received good advice.

All the best to your future endeavours.



Dear JC

Thank you for your feedback.

Many of my advisers are also not pushy and they give good advice as well, for the benefit of the customer. They can serve you at your home or office.

Tan Kin Lian

Tuesday, October 10, 2006

Faster processing of Incomeshield claims

For September 2006, we settled 51% of Incomeshield claims within 7 days, a vast improvement compared with 1% in July.

The recent implementation of several measures contributed to speeding up the processing of claims:

a) auto mapping of medical condition
b) auto mapping of surgical table/benefit
c) direct access to claims by approving officers (avoid data entry)

We will soon automate the processing of within-deductible claims. This will help to speed up the processing of the remaining claims.

William Fong
Head, Group & Health Dept

Fierce competition for motor insurance

A policyholder received a quotation of $900 for the renewal of his motor insurance from company A. He visited our business centre. Our current rate for his risk profile is $766.

He went back to company A, which promptly reduced the premium to $700. Later, company H reduced the premium to $654.

NTUC Income will continue to charge our premium rate based on our cost of claims and expenses. This is an adequate rate.

Some competitors are willing to undercut our premium rate to win over the business. However, as their claim cost and expenses are higher, they will have to increase the premium rate on the following year.

This irresponsible price cutting is not sustainable.

Supplementary Retirement Scheme (SRS)

The Central Provident Fund is designed for Singapore workers to make savings for their retirement and other purposes. Singapore workers contribute up to the salary ceiling (about S$4,000 per month). Contributions are tax exempt and the benefits are received free of tax.

The Supplementary Retirement Scheme was created to allow the foreigners and high income earners to make supplementary savings for their retirement. Contributions are tax-exempt but 50% of the benefits are subject to tax. It benefits the tax-paying contributors due to deferral of tax.

The tax benefit is modest, but it is better than nothing. The cost to the government is also quite modest.

Currently, the maximum sum that a Singaporean can contribute to the SRS is about $11,000. This is too small to be worth while.

I suggest that the SRS be reviewed, so that it can be more adequate as a vehicle to save for retirement. I propose that the contribution to SRS be set at 20% of the taxable income, less any contribution to the CPF.

Most people need to save about 20% of their income to meet their retirement needs. The CPF gives the best tax advantage, but the government wish to reduce the tax leakage. Under the SRS scheme, the tax leakage is reduced, as 50% of the benefit receievd (which includes capital gains) is subject to tax.

I hope that the Government will consider this proposal, to enable more people to make adequate savings for their retirement.

Comparsion of cost and returns for Critical Illness plans

Are you paying the right cost for your critical illness plan? Do they give you a fair return for your premium?

The following table shows the amount that you are insured for $150 a month, and the cash value at the end of 20 years.

NTUC Income's cash value is 50% higher than company A and company H, and 15% higher than company P.

We are able to pay much more, because we pay a lower commission to our adviser and lower dividend to our shareholders.

Make the right choice! Take care of your interest! Do not pay more than necessary!

Male, 25 $150 monthly prem

Company Sum Assd Cash Value Yield
NTUC Income $84,990 $47,260 2.9%
Company P $88,770 $41,340 1.7%
Company M $93,360 $34,940 0.9%
Company A $78,950 $30,720 -1.1%
Company H $81,090 $27,510 -2.2%

Male, 40 $150 monthly prem

Company Sum Assd Cash Value Yield
NTUC Income $47,850 $40,490 1.5%
Company P $48,060 $36,270 0.4%
Company M $56,270 $34,030 -0.2%
Company H $46,150 $28,240 -2.0%
Company A $45,050 $27,420 -2.3%

Sunday, October 08, 2006

Does Incomeshield cover Hypertension and Diabetes?

Hi Mr Tan,

I have visited your blog once in a while and must say that it is informative from a NTUC point of view. I’m not sure how it will be after you have left NTUC. I hope comments will be as impartial and provocative as possible.

I have a personal question though. Read somewhere in which you reply about a person with controlled diabetes and hypertension being covered under incomeshield. Could you tell us if the person will still be covered for diabetic and hypertension treatment?



Dear D

The Incomeshield plan covers the cost of hospital stay and certain outpatient treatment (for specified illness), subject to certain limits, and after deucting the Deductible and Co-payment. Details are found in this FAQ:

If the insured person has a previous medical condition (eg hypertension and diabets) and is accepted for Incomeshield, he will be covered for the hospital stay arising from these conditions. He is not covered for the cost of regular medication to treat these conditions (as they are not covered under the plan).

Tan Kin Lian

How to get Critial Illness Cover at a lower cost

Some insurers advertises the value of critical illness cover. But, they do not tell you about the cost of their product.

The critical illness cover is marketd by an adviser who earns a large commission. You have to pay about 150% of your annual premium in distribution cost. If your annual premium is $3,000, you have to pay $4,500 for the advice.

The cost of the critical illness cover is additional to the above. And the profit taken by the insurance company is another significant portion.

In fact, the actual cost of the insurance is quite low (based on the percentage of people who make a claim). The expenses take away a large part of the premium.

If you buy a similar product from NTUC Income, the distribution cost is about half of the market average. We take away a very small portion as profit for shareholders.

For most of our products, we are able to pay a much higher return to our policyholder, for the same premium and amount of cover. The difference is about 15% for a 20 year policy, and can be higher, if the policy is kept for a longer period.

27% market share in health insurance

For year 2005, our market share is estimated at 27.3%. We are 1st in ranking ahead of AIA(18.9%) and Great Eastern Life(18.8%).

Annual premium $million

Individual Group General Total
Income 199.6 23.2 - 222.8
Industry* 558.3 121.5 137.7 817.5*
Mkt share 35.8% 19.9% - 27.3%

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