Tan Kin Lian's Blog: Guts and honour

Tuesday, May 06, 2008

Guts and honour

Mr. Tan,

I have read the postings in your blog and news reports about your campaign to get NTUC Income to reverse its decision to cut policyholders' annual bonus.

Objectively, you are doing the right thing. I applaud you for doing it inspite of some criticisms that you are like Mahathir, i.e doing it out of bitterness. Far from it. Those who read your blog know that you have always been objective. When NTUC Income was doing the right things, you applauded the actions. You also recommended NTUC Income's products that were truly superior to products from other financial institutions. Now that NTUC Income is doing the wrong thing, it is only right that you speak. This is what I really call guts and honour.

The guts to speak up when things are not right. I see you in mould of ex-US President Jimmy Carter, somebody with conviction and honour. He don't care what President George Bush thinks as long as he knows that he is doing the right thing. He has the guts to speak to Kim Jong Il and the Hamas leaders even when the US Government boycotted these leaders.

NTUC Income's action is wrong for two reasons. Firstly, it cannot cut the annual bonus (which is guaranteed and vest in the policyholders) unilaterally of existing policies. It cannot just say that it will give a higher terminal (or special) bonus when this bonus is not guaranteed. If the funds are not doing well at the points when the policies mature or are surrendered, some policyholders may well get no terminal bonus.

NTUC Income cannot say these is what commercial insurers do. It is precisely because policyholders want a higher annual bonus that they bought from NTUC Income and not from the commercial companies.

Secondly, NTUC Income cannot say that they hold the money back because they will invest for policyholders and they might get higher returns at the end. As they say, "a bird in the hand is worth two in the bush". The higher return is dependent on various contingencies which may never materialise.

I take NTUC Income's action as a breach of promise to policyholders and in bad faith.

N

8 comments:

Anonymous said...: One of the cooperative values is paying higher annual bonus than the commercial companies which they can't even they want.Policyholders bought because of this feature.
The new management wants to change it
and run like commercial .I think NTUc needs right now is change of management.; May 06, 2008 10:14 AM
Anonymous said...: Is new management want to impress someone from the "Top" other than the policyholder to show than within one year from their hand that they can do better than Mr Tan and do not bother about the original spirits of the setup " to always placed the interests of our policyholders foremost"?; May 06, 2008 1:26 PM
Unknown said...: Good Afternoon, Mr Tan.

I read with great interest the media reports in TODAY and in ST on your dissatisfaction with regards to the bonus cuts in your life insurance policies with NTUC.

Sir, while I respect you as a veteran in the insurance industry and applaud you for coming up with some innovative products while you were the Chief at NTUC Income, I am appalled at your display of emotions in this matter.

Perhaps, allow me to take you down memory lane. Times were bad in the early 2000s and life insurers (commercial and non-commercial) cut bonuses except for one commercial insurer. Commercial life insurers are governed by the Companies Act, Cap. 50 whereas NTUC Income, being a co-operative society incorporated under the Co-Operative Society Act, Cap. 62, have certain benefits as a co-operative which companies do not enjoy. But yet as a Chief then, you allowed bonus cuts to NTUC Income’s life insurance policies, which I believe include yours as well, and policyholders were given reasons for the cuts.

To put it simply, Sir, you can cut bonuses of life policies while holding the helm at NTUC Income with valid reasons (whether accepted and/.or understood by policyholders or not) and now as a policyholder, you cannot accept the bonus cuts by your insurer?

Sir, you do remember what is RBC framework and its implications for life insurers, don’t you? You also will remember what you had written, allow me to quote:

“In line with our latest bonus declaration and to better manage our policyholders expectations, we will project our future bonuses prudently using [x%] instead of [y%].”

“The new bonus rates must be used…… These rates are only for benefit illustrations and the actual bonus rates may differ from these rates depending on actual investment returns and surplus earned.”

Last but not least, it has NEVER been a contractual term that bonuses are guaranteed; if it has been, then why the “NON-GUARANTEED” heading in all benefit illustration that you and I sign as a policyholder?

Thank you, Sir, for your time, and here is one of my favourite phrases for you. Cheers :)
"擁有": 因為很多東西、人和事，我們看來是擁有著，把握在手，卻不儘如是。
生命無常，當您停止呼吸，你所"擁有"的也只是"曾經擁有過"的記憶而已。; May 06, 2008 1:58 PM
Anonymous said...: i fully agree with wat the underwaterclown said .; May 06, 2008 5:50 PM
Anonymous said...: It is not easy to understand the issue if you remain under water. I hope you surface.
The bonus cut is NOT for now but it is every year and for the rest of the term and be paid to you as special bonus, not guaranteed and if you are still alive. If you are dead it is paid to your beneficiary.We also understand annual bonus is not guaranteed but on year to year basis and good insurers will compensate the cut when investment is good.Declared is ours.
But the new bonus scheme is different. Meantime, if you need money you are to draw from what is available in the cash value which used to be a lot more and now it is shrunk.
Time value of money, you heard of this phrase?. It means money NOW is WORTH more than money tomorrow.
So RBC is the insurer's business. We bought because of this high annual feature and this sets Income's products apart from other other companies'.

Zhumeng:o); May 06, 2008 6:29 PM
Anonymous said...: Hi 10.14AM, I do not recall that one of the cooperative values is to pay higher annual bonus than commercial companies which they can't even they want- where did you get that from? There are no rule of thumb or clear cut rules on the bonus philosophy for an insurance cooperative. I believe Income is still aiming to give the best value to the policyholders but it is managed in a different way, with a philosophy that is different from the previous management.; May 06, 2008 6:52 PM
Anonymous said...: Well, 6.52Pm, it is not in the book of rules that cooperative gives high annual bonus. It is bonus that cooperative can give only becuase of the savings cooperative enjoys and it is passed to policyholders. You got it? I don't understand why current company cannot do it and has to resort to cut and to repay it in the far future. I have no doubt that NTUC is trying but with current team I have doubts. The whole team is made of people with other experience and applying that to financial products. Their actions tell you. The products they rolled out tell you that they are out of touch with changing industry. They are not value for money for the consumers. They are suitable for product pushers to achieve high turnover. This does not many people are helped.This means many people are conned and fleeced.
The previous management's mission was to provide affordable insurance products to ordinary man in the street.
The current management's mission is to outdo the previous management by using the greedy agents to carry out this mission. The new bonus structure tells you it is deviating from the cooperative mission.; May 06, 2008 11:02 PM
Anonymous said...: 11.02PM Can you tell me what products in the market is better than Income? Gives better value than Income such that you feel it is no longer serving its puepose? The new bonus structure does not tell me the same message as it is telling you, to me it is a change in bonus philosophy, still working to achieve the best returns for the policyholders.; May 07, 2008 3:10 PM