Dear Mr Tan,
I have read your article in MyPaper. I felt there were several important factors that you did not take into account when giving the advice to your wealthy client.
I feel that as a person giving financial advice in the papers, which is also read by people with absolutely no financial background, it is important for you to justify your stance and to explain clearly the mitigating factors in this situation.
1. The person mentioned may have assets amounting to several million but they could be tied down in investments that are difficult to liquidate, for instance in properties. As such, he might not have sufficient cash at hand should a medical emergency arise if he does not have any medical insurance.
2. By not buying medical insurance, the person must now always have a fairly decent sum of cash at hand, pehaps $100,000. This would mean opportunity costs as the person could have generated interest had he placed his money into investments. In a decent mutual fund or stock portfolio with a return rate of 15%, this would mean losing $15,000 per year in potential interest. (I obtained this figure because the average annual stock market return is 15% for the past consecutive years, and I obtained the interest rate figure for mutual fund based on a Straits Times article on funds)
3. The person mentioned is likely to be even more affected if he is a retired/non-working individual who is dependent on the return from his assets. Should he not have sufficient cash at hand and is forced to liquidate one or two of his investements to pay for medical fees, he then loses a source of income. In the worst scenario should he be diagnosed with a condition that requires monthly medical payments (like diabetes), his financial situation is made worse as his income has fallen and his expenses have increased.
4. When a medical emergency arises, the person (and perhaps the family) will not be in a sound mind to make financial decisions. Having medical insurance would lift this burden from him.
It is hence a wiser decision to buy medical insurance and pay at most a hundred a month, rather than be caught unprepared when the situation arises.
Just for the record, I would like to clarify that I am NOT a financial advisor and this letter is not written to support the general insurance industry.
MY REPLY:
Thank you for expressing an alternative piece of view. I think that there are many people who agree with you, whle there are others who agree with me.
If the poor need medical insurance; the right need it even more.
ReplyDeleteA friend's brother is a Tan Sri from KL. He is a director of some 30 companies in Malaysia and overseas. He often comes to Singapore for medical treatment.... and have undergone so many surgeries.
He reminds me of the saying, "A man spends his life to become wealthy; at the end he spends all his wealth to get back his life".
Don't you think the rich need medical insurance too?
Mr Tan's views are more orthodox. The rich can be self-insured. This opinion can be found in many finance-related books.
ReplyDeleteThe rich don't need insurance but they can buy insurance if they WANT.If the premium is small and the loss is big, why not. But often
ReplyDeleteit is not the case. The premium will depend on the probability.
The poor NEED insurance not because they want , they have to.That is the difference.
For the Tan Sri, he needs asset protectors and the purpose of insurance is to protect against his assets being devastated because of an event. Eg , like car, householders, home, medical. critical illness ,professio0nal idemnity, etc.
Having said that, they can either transfer completely, retain some or self insurance.
Remember all the events need not happen. If you have the means and if you think you can bear the loss
why buy insurance. It is a misconception that you need to insure everything. The insurance agents love to hear this.
A man spends his life time accumulate wealth to insure against
what? obvious poverty,unfortunate events like ill health, retirement, emergencies etc etc. His lament on having to spend on health matters is hind sight comment.