Apply new bonus structure to new policies

Dear Mr. Tan,
I know that you are a fair and open minded person. The new INCOME management wants to change the bonus structure to achieve greater flexibility, solvency and earn a higher yield. So far, you have written in your blog against this decision. Can you identify some positive reasons for their action?

REPLY
Every system will have its advantages and disadvantages. The new bonus structure may attract a certain group of policyholders. But it is not suitable for other policyholders.

If NTUC Income wants to introduce a new bonus structure with low annual bonus, they should launch a new product and attract customers to buy it. They may even approach the existing policyholders to switch to the new product. If the customers are convinced about the benefit, they will accept the change.

NTUC Income said that the new bonus structure allows greater flexibilty of investment to achieve a higher yield. This remains to be seen. They can set aside a separate fund for the new bonus structure and put the new policies into this fund. If it can indeed earn a higher yield, the policyholders are entitled to the benefit. But it carries greater risk.

It is not correct to impose the new bonus structure on existing policyholders who were sold earlier on the old bonus structure.

In my personal opinon, the old bonus structure is more suitable for the current policyholders. Those who prefer the new bonus structure already have the choice of investing in investment-linked products (ILPs).