I discussed with NTUC Income's management to seek an amicable solution that will be in the best interest of policyholders and the reputation of NTUC Income. I communicated two concerns on behalf of the policyholders:
1. The restucture of the bonus system results in a lower annual bonus distributed yearly to policyholders, to be compensated by a higher rate of special bonus (which is not guaranteed). I ask that there should be satisfactory assurance on the payment of the special bonus on surrenders and claims, so that the policyholders will not lose out on the restructuring of the bonus.
2. In some past years, policyholders received a bonus cut (compared to what was illustrated at the point of sale) when the investment yield was low. As NTUC Income had earned a good yield of 7.8% earned during the past 10 years, I suggest that the shortfall in the bonus for the poor years be restored as early as possible, subject to financial solvency. I pointed out that the actual yield is higher than the projected yield at the point of sale.
To allow more time to find a settlement, I indicated that I will set aside the Collective Protest for the time being. I hope that an amicable solution can be found, so that the protest will not be necessary.
The Straits Times reported that Income had issued a statement that the old bonus structure is unsustainable. I disagree. For policies taken in the earlier years, they were based on a projected yield of 6.5%. For policies issued in the later years, they were based on a projected yield of 5.25%. These were realistic estimates of the future yield made at that time. The actual yield earned over the last 10 years turned out to be higher, at 7.8%.
Under the old bonus system adopted by NTUC Income, the sustainable rate of bonus is not a rate that is fixed. It is a rate that is adjusted from time to time, to reflect any change in the projected yield. If the yield goes up, the rate of bonus is adjusted upwards. If it comes down, it is adjusted downwards.
During the 1970s and 1980s, the bonus rates were adjusted upwards very few years. During the late 1990s, in the low interest rate environment, the bonus rates were adjusted downwards. In recent years, there is a case for the bonus to be adjusted upwards.
I believe that this system is fairer to policyholders and allows them to enjoy a higher vested bonus each year. This increases their cash value and reduces their loss, if they have to terminate the policies in the earlier years.
Tan Suee Chieh said that my change of tone was probably due to a better appreciation of issues behind the bonus structure. This is not the case - and I had told Tan Suee Chieh about it earlier. I had understood the issues earlier and had concerns about the change. My wish now is to find a solution that is in the best interests of the policyholders and the reputation of NTUC Income.
Some policyholders have asked me to insist that they be given the right to choose between the new and old bonus structure. I hope that this is possible and believe that it is the best option.
If NTUC Income's managment is convinced that the new bonus structure is likely to give a better return to the policyholders, they should be able to convince most policyholders to move to the new structure.
Mr.Tan, I hope you are not throwing in the towel yet.Don't miss this chance to send a strong message to the new management not to be high handed and suka suka use our money to play play and toy with new ideas.. This is deviating from its social responsibility.
ReplyDeleteI find the restructuring is putting policyholders' interest to greater risk although it says for higher return but it also means more money to lose. This is not the right time for any aggressive changes. The company should continue to take a more conservative stance in the face of the current uncertainty. Preservation of capital should be the priority.
The best way out is to offer options for policyholders, to opt in or stay status quo.We cannot be forced.
Dear Mr. Tan,
ReplyDeleteMay I ask if the non-guaranteed reversionary bonuses are determined by individual insurance company? Are these bonuses declarations subject to MAS regulatory control or are they depend on the “mood” of the insurance company?
I have similar situations with AXA, where to our disappointments; both the payouts of non guaranteed reversionary bonus for matured policies of ours (my wife & mine) are grossly reduced to a mere 0.12% of the sum assured, instead of the 0.45% as per point of sales illustration. More unbelieving was the fact that the company declared their overall total assets investment return for 2007 was 5.7% p.a. with fixed income return of 4.9% p.a. and a strong equity portfolio investment return of 8.6%.
We feel that we are not given the fair share of the illustrated payouts of the reversionary bonus during last few years, with the strong performance of the economy and the insurance company in particular. Now, we learnt that the illustrated numbers at the point of sales are no more than a set of empty promised number.
I see no other alternatives, besides writing to the insurance company for clarifications and going to Fidrec, the equivalent of CASE, to seek redress. Do want to learn from you on how can the interest of the policyholders be protected from the giant Insurance Company from either “misrepresenting” or “under declaring” their payouts to earn more from us, the commoners.
I believe Mr Tan is a good chess player :D
ReplyDeleteDear Raymond
ReplyDeleteI am not a good chess player. I am just a honest man, speaking my mind, trying to be fair and to do what is best for the largest number of people.
I am against people who exploits other people for their personal gain.
Or people who lie and manipulate facts to make themselves look good.
Dear nine
ReplyDeleteBetter to invest in a low cost investment fund. It is transparent. You keep most of the gains for yourself.
Advise your family and friends about this bad experience. It will happen, again and again.
Avoid high cost life insurance products. You can never get any good value from them. Most of your investment gains are taken away as expenses and profit. You will be given only very little left.